oversight

Household Goods: Competition Among Commercial Movers Serving DOD Can Be Improved

Published by the Government Accountability Office on 1990-02-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

4
      United   States   General   Accounting   Office
      Report to the Chairman, Legislation
GAO   and National Security Subcom m ittee,
      Com m ittee on Government Operations,
      House of Representatives


      HOUSEHOLD                                    GOODS
      Competition A m ong
      Com m ercial Movers
      Serving DOD Can Be
      Improved
National Security and
International Affairs Division

B-23767 1

February 12,199O

The Honorable John Conyers, Jr.
Chairman, Legislation and National
  Security Subcommittee



Dear Mr, chairman:

This report responds to a request by the former Subcommittee Chairman that we review the
practices and procedures of the Department of Defense in procuring commercial household
goods shipping services for personnel being transferred at government expense between duty
stations within the United States.

Unless you publicly announce its contents earlier, we plan no further distribution of this
report for 30 days. At that time, we will send copies to the Secretaries of Defense, the Army,
the Navy, and the Air Force; the Chairmen, House and Senate Committees on Armed Services
and on Appropriations; the Director, Office of Management and Budget; and to other
interested parties.

This report was prepared under the direction of Richard Davis, Director, Army Issues, who
may be reached at (202) 275-4141 if you or your staff have any questions. GAO staff
members who made major contributions to this report are listed in appendix IV.

Sincerely yours,




Frank C. Conahan
Assistant Comptroller General
ljxecutive Summary


              The Department of Defense spends over $400 million dollars a year to
Purpose       ship and store the household goods of its members authorized to make a
              transfer or to relocate within the 48 contiguous United States. The
              money is paid to commercial household goods carriers and their agents
              located throughout the United States.

              The former Chairman of the Legislation and National Security
              Subcommittee, House Committee on Government Operations, asked GAO
              to study the methods the Department used to solicit rates from moving
              companies and to select the companies it used. GAO was also asked to
              examine the Department’s effectiveness in managing temporary storage
              required in conjunction with shipments of personal effects.


              A military member or civilian employee of the Department of Defense
Bfwkground    who is ordered to make a permanent change-of-station or other
 /            approved move is entitled to ship and/or store, at government expense,
 I            an authorized amount of household goods and personal effects. The
              Army’s Military Traffic Management Command, on behalf of the entire
              Department of Defense, is responsible for soliciting rates from commer-
              cial moving companies for the packing, transportation, and storage of
              such goods and for providing traffic management guidance to the local
              personal property shipping offices that arrange for the moves.

              Rates are offered the Department of Defense under a two-step or two-
              phase bidding system. In the first phase, each carrier submits a specific,
              or qualifying, bid-stated as a percentage of a fixed baseline-for any
              or all of the more than 7,000 routes for which the Department asks for
              rates. The percentage can be at, above, or below the baseline.

              In the second bidding step, which is commonly called the “me-too”
              phase, each carrier is given a chance to see what the other carriers bid
              and is permitted to match any lower bid. The carriers’ final bids, called
              “rates,” are ranked in a low-to-high order and given to the local shipping
              office officials for distribution of shipments. When more than one car-
              rier qualified to serve a location has offered the same low rate, the offi-
              cials are required to distribute the shipments as equally as possible to
              each such carrier without regard to which carrier submitted the low
              rate first. When there are more shipments than the low rate carriers can
              handle, the officials are required to move up the rate ladder to the next
              rate level and distribute the traffic as equally as possible to all such
              qualified carriers at that level.



              Page2                             GAO/NSLADQO-SODOD'sHouseholdGoodsCarriers
                   Executive Summary




                   The Department of Defense’s two-phase system for obtaining rates for
Resdlts in Brief   moving household goods is not truly competitive. Carriers that bid the
                   lowest rates initially are not rewarded, so there is no incentive to pro-
                   vide the lowest rate initially. Knowing that they will have the opportu-
                   nity to meet the lowest rate offered and to eventually share equally in
                   any traffic generated, most carriers make no effort to bid competitively
                   during the initial bidding phase. Instead, most carriers merely bid a
                   qualifying rate- often the same rate for every route they intend to
                   serve -and then rebid, as necessary, at lower levels during the second
                   phase. The result is that there is often little difference between many
                   carriers’ rates, and carriers that make the effort to initially submit the
                   lowest rates are not given any greater reward than those that simply
    ,
                   wait to meet whatever other rates are offered.

                   To obtain a larger share of Department of Defense household goods
                   shipments, many carriers have established, on paper, subsidiary compa-
                   nies. Providing an equal share of the traffic to such “paper” companies
                   makes the current system inequitable to the other low bidders.

                   GAObelieves that a change is needed in the Department of Defense’s bid-
                   ding system to encourage carriers to offer their lowest rates during the
                   initial bidding phase and then reward those with the best offers. GAO
                   concludes that replacing the current two-phase bidding process with a
                   one-phase system, whereby all carriers have equal incentive to bid the
                   lowest possible rates and those offering the lowest rates are rewarded
                   with all the traffic they can handle on the route for which they are the
                   low bidders, would probably provide the carriers the most incentive to
                   offer their lowest rates initially. If the Department of Defense deter-
                   mines that such a bidding system would not provide it the moving capa-
                   bility needed or would result in an unacceptable quality of service, it
                   could modify the two-phase system so that the carrier offering the low-
                   est rate during the first phase is allocated a greater share of the traffic
                   than any other carrier simply meeting the low rate.

                   W ith respect to storage, the Department of Defense lacks data on the
                   total actual cost and incidence of temporary storage. Estimates suggest
                   that the overall figure is in excess of $100 million a year. At 9 of the
                   10 local shipping offices that GAOvisited, goods were stored for over 50
                   percent of the shipments. Although the need for some storage will
                   always exist, storage costs could be reduced by making greater use of
                   storage at origin, which is generally less costly than storage at destina-
                   tion In addition, reducing the incidence of storage should be possible



                   Page 3                            GAO/NSIADdOdO DOD’s Household Goods Carriers
                            Executive Summary




                            through better coordination and communication among the shipping
                            offices, the carriers, the receiving offices, and the military members.



Prhncipal Findings

Cqrriers That Set the Low   GAOfound that carriers typically offered their initial bids at or above
Rqtes Are Not Rewarded      the baseline and then surveyed the competition to decide which rates to
                            lower. Few carriers made any attempt to initially establish below base-
                            line rates. Only 49 of the 487 carriers bidding on the traffic for over
                            7,000 routes during the May 1988 6-month rate cycle initially bid below
                            the baseline, and only 3 of these 49 carriers made more than a few such
                            below baseline bids.

                            Most carriers rebid and lowered their initially bid rates. Nevertheless,
                            the carriers that initially established the lower rates that others subse-
                            quently met received no greater reward than the carriers that simply
                            waited until the second phase to meet the rates. Whatever incentive any
                            carrier has for initially bidding low is eliminated when the Department
                            of Defense gives every other carrier the opportunity to meet the low
                            rate and to share equally in the traffic on that route.


Other Bidding Systems       The Department of Defense at one time employed a two-phase bidding
Have Worked for Other       concept similar to the current interstate bidding system to obtain rates
                            for its international moves. W ithout reference to any baseline, carriers
Government Moves            bid an initial rate for each route they intended to serve and were then
                            allowed to “me-too” the low carrier’s rate and to share equally in the
                            available business. In 1976 GAOreviewed that system and concluded
                            that introducing more competition by rewarding the initial low rate car-
                            rier would reduce rates, thereby resulting in savings in transportation
                            costs. GAO'Sposition was supported by the fact that rates on a test route
                            were reduced by an average of 19 percent.

                            The General Services Administration, which obtains household goods
                            rates for civilian government agencies, uses a single phase bidding sys-
                            tem in which carriers bid against a carrier-adjusted baseline. Nearly all
                            the bids the General Services Administration receives are below the
                            baseline and are dispersed at many different rate levels.




                            Page 4                            GAO/NSIALl-90-60 DOD’s Household Goods Carriers
                          Executive Summary




                          GAOrecognizes that the Department of Defense’s domestic household
                          goods market is different from its international markets and those of the
                          civilian agencies in terms of carrier investment, numbers of carriers,
                          types of carriers, carrier capabilities, and numbers of shipments. Never-
                          theless, the experiences of the Department of Defense with its interna-
                          tional bidding system and the General Services Administration suggest
                          that when no “me-toeing” is permitted or the original low bidders are
                          rewarded, competition is enhanced.


Storgge-in-Transit        Goods were generally stored in transit because members were not in
Program Can Be Improved   positions to receive their personal effects at their new duty stations
                          when deliveries were attempted. Often, members had not found ade-
                          quate and/or affordable housing; receiving units had not been able to
                          find members to arrange for delivery; or shipments had arrived at desti-
                          nation before the personnel.

                          Storage costs could be reduced by using storage at origin instead of at
                          destination because storage at origin is generally chargeable at dis-
                          counted or lower long-term storage rates. Also, reducing the incidence
                          and/or the cost of storage should be possible through better coordina-
                          tion and communication among shipping activities, members, carriers,
                          and receiving activities. Such coordination includes ensuring that the
                          shipping/receiving offices know when the members can take possession
                          of their goods at destination, the members give the shipping/receiving
                          offices addresses where they can be located when the household goods
                          are expected to be delivered, and all parties know when carriers are
                          planning to deliver the goods.


                                recommends that the Secretary of Defense direct the Commander of
Recbmmendations           GAO
                          the Military Traffic Management Command to replace or modify the cur-
                          rent two-phase bidding process so that all carriers have incentive to ini-
                          tially bid the lowest possible rates and the lowest bidder is rewarded for
                          offering the lowest rate. GAOis also making other recommendations to
                          the Secretary of Defense designed to improve the management of stor-
                          age-in-transit.


                          As requested, GAOdid not obtain official agency comments on this
Agency Comments           report. However, it discussed the report with agency and moving indus-
                          try officials.



                          Page 5                           GAO/NSIAD-90-60 DOD’s Household Goods Carriers
Cbntents


Eqecutive Summary                                                                                         2
  1
Chapter 1                                                                                             8
Intjroduction          DOD’s Interstate Program
                       Objectives, Scope, and Methodology
                                                                                                      8
                                                                                                      9

Chapter 2                                                                                            12
Two-Phase Bidding      The Bidding and Traffic Allocation Process
                       Few Carriers Bid Below Baseline Rates During Initial
                                                                                                     12
                                                                                                     14
Sybtem Is Not Truly          Phase
Competitive            Most Carriers Rebid Rates During the Second Phase                             15
                       Rates for Most Routes Were Bunched at One Level                               17
                       “Paper” Companies Often Created to Increase Market                            18
                             Shares
                       Other Bidding Systems Have Worked for Other                                   21
                             Government Moves
                       Military Versus Commercial Rates                                              23
                       Military and Industry Views                                                   24
                       Conclusions                                                                   27
                       Recommendation                                                                28

Chapter 3                                                                                            29
Opportunities to       Storage-in-Transit Entitlements and Management
                            Responsibilities
                                                                                                     29
Reduce Storage Costs   Carrier Charges for Storage-in-Transit Services                               30
                       Summary Data on Cost and Extent of Storage-in-Transit                         31
                            Is Lacking
                       Major Reasons for Storage-in-Transit                                          32
                       Cost and Incidence of Storage Can Be Reduced                                  34
                       Conclusions                                                                   36
                       Recommendations                                                               36

Aependixes             Appendix   I: Companies Visited by GAO                                        38
                       Appendix   II: DOD Shipping Offices Visited by GAO                            39
                       Appendix   III: Shipping Offices’ Carrier, Rate, and Work                     40
                           Load   Data
                       Appendix   IV: Major Contributors to This Report

Tables                 Table 1.1: Fiscal Year 1988 DOD Interstate Household
                           Goods Data


                       Page 6                            GAO/NSIAD-90-50 DOD’s Household Goods Carriers
         Table 2.1: Extract From MTMC’s Interstate Baseline Rate                     13
             Table
         Table 2.2: Number of Initial and Final Rates by Rate Level                   17
             Bid During the May 1988 Bidding Cycle
         Table 2.3: Principal Carriers and Other Carriers Under                      20
             Their Control
         Table 111.1:Comparison of DOD Shipping Offices’ Data                        41

Figrre   Figure 2.1: Comparison of Initial Phase and Final Rates                      16
              Filed During the May 1988 Household Goods Bidding
   (          Cycle




         Abbreviations

         DOD      Department of Defense
         GAO      General Accounting Office
         GSA      General Services Administration
         MTMC     Military Traffic Management Command


         Page 7                           GAO/NSIAD-90-50 DOD’s Household Goods Carriers




                                *
Ch&mr   1

Irbroduction


                   Under the applicable federal travel regulations, a military member or
                   civilian employee of the Department of Defense (DOD) ordered to make a
                   permanent-change-of-station move is entitled to move, at government
                   expense, an authorized amount of household goods and personal effects.
                   The entitlement includes the actual transportation and any necessary
                   associated services, such as packing, unpacking, and temporary storage.

                   Worldwide, DODspends over a billion dollars a year to move the house-
                   hold goods and personal effects of its military and civilian personnel.
                   Domestically, it spends over $400 million a year for household goods
                   moves. The money is paid to commercial household goods carriers and
                   their agents located throughout the United States.

                   The Army’s Military Traffic Management Command (MTMC) provides the
                   technical direction, supervision, and evaluation of the traffic manage-
                   ment aspects of the DODpersonal property shipment and storage pro-
                   gram worldwide. Some of its more important responsibilities include
                   approving carriers for participation in the household goods shipping
                   program; soliciting the commercial carrier industry for shipping rates;
                   negotiating, analyzing, assessing, and accepting rates; establishing stan-
                   dards for measuring and evaluating carrier performance; prescribing
                   rules for allocating shipments among competing carriers; and collecting,
                   analyzing, maintaining, and disseminating data required for effective
                   program management.

                   The overall goal of the DODhousehold goods moving program is to pro-
                   vide quality and responsive moving and storage service to its personnel.
                   In promoting that goal, DOD'Spolicy is to procure services only from
                   responsible carriers, storage firms, and contractors. Carriers, their
                   agents, storage firms, and contractors must have appropriate authority
                   to provide the required services, evidence of the ability to provide satis-
                   factory service, evidence of satisfactory equipment and facilities, and
                   evidence of appropriate financial resources to perform.


                   In fiscal year 1988, DODmade about 228,000 domestic shipments, most
DOD’s Interstate   in interstate service, involving more than one billion pounds of house-
Program            hold goods. The cost of moving these shipments was approximately
                   $321 million. Table 1.1 breaks this data down by branch of service.




                   Page 8                            GAO/NSIAD-SO-SO DOD’s Household Goods Carriers
                                  Chapter 1
                                  Introduction




Table 1.1: Fiscal Year 1988 DOD
lnterstgte Household Goods Data                                    Shipments       Weight (millions           cost
                                  Branch
                                    __.--_-of service
                                  ___                            (thousands)           of pounds)       (millions)
      I
                                  Army                                    78                    342          $101
                                  _I-_____
                                  Navy                                    63                    284            83
                                  Air Force                               69                    343           112
                                  _ ._--_--.-
                                  Marine Corps                            17                     80            24
                                  -_____
                                  Other DOD                                1                      4             1
                                  Total                                  228                  1,053          $321


                                  In addition to the $321 million, DOD estimated it spent another $109 mil-
                                  lion for temporary storage and other household goods-related services
                                  for interstate shipments.

                                  The day-to-day management of individual interstate shipments is done
                                  by DODshipping offices. There are 152 shipping offices in the contiguous
                                  IJnited States and 5 in Alaska. W ithin their designated areas, the ship-
                                  ping offices approve carriers for service, procure the necessary shipping
                                  and storage services, allocate the shipments among competing carriers,
                                  determine and evaluate carrier performance, take punitive action
                                  against carriers whose performance does not measure up to acceptable
                                  standards, and provide M T M Cwith shipment and performance informa-
                                  tion needed to carry out its functions.

                                  WD procures most of the necessary moving and storage services from
                                  commercial carriers who are held accountable for movement from origin
                                  to destination, It uses two types of carriers: (1) moving van companies,
                                  which are motor common carriers issued certificates by the Interstate
                                  Commerce Commission and (2) household goods freight forwarders,
                                  which are surface common carriers permitted by the Interstate Com-
                                  merce Commission to assemble and consolidate shipments of household
                                  goods and other personal effects and use motor, rail, or water carriers to
                                  transport them. The moving van companies and freight forwarders are
                                  represented throughout the country by agents who are usually indepen-
                                  dent contractors operating under agreement with the carriers to handle
                                  the packing, loading, storing, unloading, and unpacking of the goods,
                                  wherever needed.


                                  The former Chairman of the Legislation and National Security
Objectives, Scope,and             Subcommittee, House Committee on Government Operations, requested
Methodology                       that we review DOD'Sprogram for the interstate movement of military
                                  members’ household goods. He said that he was concerned about the


                                  Page 9                           GAO/NSIAD-90-60 DOD’s Household Goods Carriers
Chapter 1
Introduction




level of competition among carriers in establishing the prices to charge
DODand about the equity in the manner in which DODdistributes ship-
ments among the competitors. He asked us to study the methods and
procedures DODused to solicit rates from moving companies and to select
the companies it used.

He also asked us to ascertain the cost of storage for the DODhousehold
goods and personal effects program, the extent to which DODpersonal
effects shipments are stored, and reasons for any unusually high inci-
dence of storage.

To obtain information about the household goods industry and how it
interacts with DODin the transportation of interstate shipments, we
interviewed officials of 25 companies- some moving van carriers, some
forwarders, and a few agents. (These companies are listed in
appendix I.) Because many of these companies also control other compa-
nies participating in the DODprogram, the interviews provided us with
opinions and commei,ts from a total of 96 of the 590 DOD-approvedcarri-
ers in the May 1988 interstate program. On the basis of fiscal year 1987
shipment data, we estimate that these companies received about half of
the DODinterstate shipment revenues. We also used information pro-
vided to us by other carriers.

We met with and solicited comments from officials of various household
goods carrier associations and rate bureaus, including the American
Movers Conference, an association of household goods carriers; the
Household Goods Forwarders Association of America, an association of
household goods freight forwarders; the Household Goods Carriers’
Bureau, a household goods carrier rate and tariff publishing bureau; and
the Alaska Movers Association, an association of carriers involved in the
Alaskan DODshipment market. We also used information provided to us
by other carrier associations.

We met with officials of the Office of the Assistant Secretary of Defense
(Production & Logistics), MTMC,the Army, the Navy, the Air Force, the
Marine Corps, and 10 DODshipping offices representing each branch of
service to discuss DOD'Sinterstate household goods program (including
DOD'Sstorage procedures) and DOD'Sinteraction with the household
goods industry. (The shipping offices are listed in appendix II.)

To obtain information with which to compare DOD'Sprogram with that
of civilian agencies of the federal government, we met with the house-
hold goods program manager of the General Services Administration in


Page 10                          GAO/NSIAD-90-60 DOD’s Household Goods Carriers
Chapter 1
Introduction




Overland Park, Kansas. We also used information provided by the
Interstate Commerce Commission in Washington, D.C., to obtain an
understanding of the regulatory aspects of the household goods carrier
industry.

To give us a snapshot of carrier rate-filing patterns and the rates on
each route in the DODinterstate household goods program, we analyzed
all the rates filed with M T M Cduring the May 1988 rate cycle. Although
rates for shipments to and from Alaska and for the Coast Guard are
included in the interstate program, we concentrated our review on the
rates for DODshipments within the contiguous United States. We
selected 30 routes for detailed analysis and supplemented this sample
with an analysis of selected rates for the November 1988 and May 1989
rate cycles.

Our work was done from September 1988 to September 1989 in accord-
ance with generally accepted government auditing standards. As
requested, we did not obtain official agency comments on this report.
However, we discussed its contents with agency and moving officials.




Page 11                         GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                                                                                                     ,
Chapter 2

*o-Phase Bidding System Is Not
Tkuly Competitive

                     Under DOD'Stwo-phase bidding system, carriers that bid the lowest rates
                     initially are not rewarded, so there is no incentive to provide the lowest
                     rate initially. Knowing that they will have the opportunity to meet the
                     lowest rate offered and to eventually share equally in any traffic gener-
                     ated, most carriers make no effort to bid competitively during the initial
                     bidding phase. Instead, most carriers merely bid a qualifying rate-
                     often the same rate for every route they intend to serve-and then
                     rebid, as necessary, at lower levels during the second phase of the bid-
                     ding cycle. We believe that a change is needed in DOD'Sbidding system to
                     encourage carriers to offer their lowest rates during the initial bidding
                     phase and then reward those with the best offers.


                     Twice each year MTMC solicits rates from the commercial moving indus-
The Bidding and      try to meet the DODhousehold goods shipping requirements over more
Traffic Allocation   than 7,000 routes. A route consists of one origin shipping office-typi-
Process              tally including a large geographical area surrounding it-to one destina-
                     tion state or the District of Columbia. There are 152 DODshipping offices
                     in the contiguous United States and 49 destinations, resulting in
                     7,448 separate routes in the contiguous United States. The volume of
                     traffic intended for a route is not known ahead of time, but history has
                     shown that some routes may generate more than 500 shipments over the
                     life of the 6-month contract, while other routes may generate none.

                     Bidding is done in two steps. Initially, or in the first step or phase, which
                     is commonly called the “increase/decrease” phase, each carrier submits
                     a specific or qualifying bid-stated as a percentage of a fixed baseline-
                     for each route it intends to serve. Once these bids are accepted, they are
                     made public for review by all bidders. Then in the second step or phase,
                     which is commonly called the “me-too” phase, carriers are permitted to
                     change any rate they had offered to match that of a lower bidder.

                     The carriers’ final bids, called “rates,” are ranked in a low-to-high order
                     and given to the local shipping office officials for distribution of ship-
                     ments. Where more than one carrier qualified to serve that location has
                     offered the same low rate, the officials are required to distribute the
                     shipments as equally as possible to each such carrier without regard to
                     which carrier submitted the low rate first. The carrier that initially sub-
                     mitted the low bid is not entitled to any greater reward than another
                     carrier that met the low rate during the “me-too” bidding phase. When
                     there are more shipments than the low rate carriers can handle, the offi-
                     cials are required to move up the rate ladder to the next rate level and



                     Page 12                            GAO/NSIAD-SO-50 DOD’s Household Goods Carriers
           .



                                  Chapter 2
                                  Two-Phase Bidding System Is Not
                                  Truly Competitive




                                  distribute the traffic as equally as possible to all such qualified carriers
                                  at that level.

                                  The baseline on which carriers file their rates has remained at the same
                                  level since the summer 1984 rate cycle. According to MTMC, the baseline
                                  is intended as a point of reference and is not intended to influence the
                                  setting of rates.

                                  An extract of the baseline table is shown in table 2.1. For example, on a
                                  5,000-pound shipment moving from Hyattsville, Maryland (a locality in
                                  the Cameron Station, Virginia, origin rate area), to San Antonio, Texas
       ,                          (a locality in the Texas destination rate area), a distance of 1,548 miles,
                                  the baseline rate is $44.90 per hundred pounds.

Table 2.1: Extract From MTMC’s
lnterstrbte Baseline Rate Table   Rates in dollars per hundred pounds
                                  --~-
                                                                                     Weight (pounds)
                                                                    500   1,000    2,000 4,000 8,000 12,000 16,000
                                  Mileage bracket
                                  .-.---     ___-                   9;    l&i      3,&i     7,G      ll,,E    I&       99,92
                                  1,401-1,450                   $77.90    $57.60   $49.45   $42.80   $37.25   $36.35   $35.80
                                  1,451.1,500                    78.80     58.75    50.60    43.80    38.05    37.45    36.65
                                  .-._~-        ____-
                                  1.501-1.550                    79.65     59.50    51.85    44.90    39.05    37.90    37.40
                                  1,551-1,600                    80.30     60.15    52.75    45.80    39.95    38.45    37.80
                                  .__ -____         __-
                                  1,601.1,650                    80.95     60.95    53.80    46.90    40.90    39.35    30.55


                                  If a carrier had bid 70 percent of the baseline on this route, its applica-
                                  ble rate-the price DODwould have been charged to move this ship-
                                  ment-would have been $31.43 per hundred pounds ($44.90 times
                                  70 percent). If a carrier had bid 120 percent of the baseline, the price
                                  would have been $53.88 ($44.90 times 120 percent).

                                  Because rates are set based on an assumption of full competition, MTMC
                                  does not ask for cost data, and consequently it makes no attempt to
                                  determine whether any carrier’s bid covers its cost of providing the ser-
                                  vice. Carriers are free to offer rates as low as they wish under statutory
                                  authority contained in the Interstate Commerce Act. A portion of that
                                  act provides that a common carrier




                                  Page 13                                   GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                        Chapter 2
                        WePhase Bidding System Is Not
                        Tn11y Competitive




                        “may transport property for the United States Government...without charge or at
                        reduced rates; except that any rates for the transportation of household goods for
                        the United States Government shall not be predatory.“’

                        The maximum rate a carrier can bid is one offered to the general public
                        and listed in the carrier’s tariff filed with the Interstate Commerce
                        Commission. Carriers must certify to MTMC that their rates will not
                        result in DOD’S paying higher charges than those available to it under the
                        carriers’ tariffs.

                        Rates must remain fixed and available to DOD for at least the first
                        l-l/Z months of the contract, after which time they may be unilaterally
                        canceled by the carrier offering them. There are four such cancellation
                        periods during the 6-month contract.


                        To assess how carriers bid their rates for DOD traffic, we analyzed all the
F6w Carriers Bid        carriers’ rates bid during the first and second phases of the May 1988
Btjlow Baselice Rates   6-month bidding cycle. We found that few of the carriers initially bid
Dtiring Initial Phase   any rate below the baseline MTMC had given them to formulate their
                        bids, Most carriers typically offered all their initial bids at or above the
                        baseline-which MTMC had kept fixed since 1984 and was set only to
                        serve as a bench mark for filing rates.

                        In the May 1988 bidding cycle, 503 carriers offered DOD one or more
                        rates to move interstate shipments. All told, the carriers offered
                        1,045,897 separate rates. For our analysis, we concentrated on motor
                        van service rates-rates for the movement of household goods in a
                        motor van from origin residence to destination residence-and elimi-
                        nated the container service rates-rates for the movement of household
                        goods in containers because very little traffic moved at those rates. We
                        also eliminated all rates to and from Alaska because shipments to and
                        from Alaska often move in part over water and rates for shipments
                        from the Coast Guard shipping offices because Coast Guard shipments
                        are not managed by DOD. This left us with 539,424 rates, 487 carriers,
                        and 7,448 routes.

                        We found that only 49 of the 487 carriers bidding during the May 1988
                        6-month bidding cycle bid below baseline rates and only 3 of those carri-
                        ers bid more than a few such rates. It was a common practice of most


                        ‘49 lJ.S.C. 10721(b). According to an Interstate Commerce Commission official, the Commission has
                        not suspended any rate becauseit was determined to be “predatory.”



                        Page 14                                     GAO/NSLAD-90-50 DOD’s Household Goods Carriers
                      Chapter 2
                      Two-Phase Bidding System Is Not
                      Truly Competitive




                      carriers-about 83 percent of them-to bid a single rate, at or above the
                      baseline, across-the-board for every route on which they bid during this
                      phase. Although the specific rate varied among carriers, most-or about
                      58 percent of these carriers- bid a rate equal to the baseline for every
                      route on which they submitted a bid during the initial bidding phase.
                      Others bid a single rate above the baseline, in some cases as high as 200
                      percent of the baseline.

                      We believe that the two-phase bidding system offered no incentive to
                      initially bid anything other than a baseline or an above-baseline rate.
                      Prior to 1984, M T M Callowed the carriers to file rates based on the carri-
                      ers’ collective rate-making bureaus’ baseline rate levels. The bureaus
                      maintained that those levels were reasonable and reflected the carriers’
                      cost of providing service for DOD.For the May 1984 rate cycle, M T M C
                      precluded the filing of rates based on collective rate-making and substi-
                      tuted its own baseline at the same 1983 level as was contained in the
                      collectively made baseline rate schedule. It has never changed that base-
                      line, arguing that carriers have the right to bid any level they care to,
                      whether at, above, or below that baseline.


                      In the second phase, 39 percent of the rates were bid below the baseline,
Most Carriers Rebid   yet the carriers that initially established the rates that others met
Rat& During the       received no greater reward than the carriers that simply waited until
SecondPhase           the second phase to meet the rates. Whatever incentive any carrier bid-
                      ding the initial low rate had was eliminated when DODgave every other
                      carrier the opportunity to meet the low rate and to share equally in the
                      traffic on that route,

                      About 78 percent of the 487 carriers rebid one or more of their rates
                      during the second phase of bidding. About 73 percent of the
                      539,424 rates were rebid. The result of the rebidding was that the aver-
                      age level of all the rates available to DODdropped and the percentage of
                      rates below the baseline increased.

                      After the initial filing period, 18 percent of the rates were at the low
                      rate level. After the “me-too” phase, more than 76 percent were at the
                      low rate level. The average of all the rates available to DODafter the
                      “me-too” phase was 90 percent of the baseline compared to 118 percent
                      after the initial phase. As shown in figure 2.1, the percentage of rates
                      below the baseline increased from less than 1 percent after the initial
                      bidding phase to 39 percent after the “me-too” phase. The changes in
                      percentages of rates at and above the baseline are also shown.


                      Page 16                           GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                                        Chapter 2
                                        Two-Phase Bidding System Is Not
                                        Truly Competitive




Fig& 2.1: Comparison of Initial Phase
and lnal Rates Filed During the         100   Powantage of Rates Fllad
    r
May11988 Household Qoods Bidding
cy ilk                                   90
                                         80
                                         70
                                         60
                                         50
                                        40

                                         30

                                        20

                                         10

                                         0

                                              Balow Baaaline          At Baaallno   Above Baseline

                                              Level at Which Rataa Wora Filed

                                                       InitialPhase
                                                       Final Phase
                                        Source: Our analysis of MTMC data

                                        The numbers of rates bid by rate level during the initial bidding phase
                                        and the number available to DOD after the “me-too” phase for the
                                        May 1988 bidding cycle are shown in table 2.2.




                                        Page 16                                     GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                                         Chapter 2
                                         Two-Phase Bidding System Is Not
                                         Tndy CompeUtive




Table 2.2: Number of Initial and Final
Rates by Rate Level Bid During the                                              During the;ait21 bidding
May ly88 Bidding Cycle                                                                    P                 After the “me-too” phase
                                         Rate                                      Number       Percent of       Number      Percent of
                                         (percent of baseline)                      of rates          total      of rates         total
                                         40-49                                              1             0             6             0
                                         50-59                                           472           0.09        9,371             1.74
                                         _------..-             --_---
                                         60-64                                           312           0.06       14,000 -..____     2.60
                                         65                                              637           0.12       21,718             4.03
                                         66-69                -.~.       ___.             33           0.01        1,089             0.20
                                         70-74                                            86           0.02        3.698             0.69
                                         75                                            2,274           0.42      138,726            25.72
                                         76-79                                            48           0.01        1,319             0.24
                                         80-89                                           548           0.10        8,719             1.62
                                         90-99                                           266           0.05       12,969             2.40
                                         100"                                        210,915          39.10      310,985            57.65
                                         101-109
                                         -~..  __.__...-..-                           28,390           5.26        1,927             0.36
                                         110-119                                      27,921           5.18        2,447             0.45
                                         120                                          89,003          16.50        4,771             0.88
                                         121-129                                      48,566           9.00        4,918             0.91
                                         130-139                                      65,428          12.13        1,924             0.36
                                         140-149                                       9,079           1.68          155             0.03
                                         150-159                                      32,779           6.08          472             0.09
                                         160-169
                                           ---__                                       6,133           1.14           18                0
                                                 .______~.
                                         170-179                                           0              0            0                0
                                         180-189                                          24              0           19                0
                                         190-199                                           0              0            0                0
                                                        -___-
                                         200                                          16,509           3.06          173             0.03
                                         -~      .______--                        -___
                                         Total                                      539,424        1OO.OOb      539,424            100.00
                                         aThrsisthe baseline.
                                         hPercentages may not total100 percent because of rounding.



                                         On a majority of the 7,448 routes for which M T M Casked for rates, once
Rates for Most Routes                    the carriers had the opportunity to rebid their rates they met the low
Were Bunched at One                      rate bid during the initial bidding phase by the low rate carrier. Conse-
Letfel                                   quently, nearly all the rates for most routes were bunched at one level.
                                         And because DODoffered every carrier meeting the low rate on a route
                                         the opportunity to share equally in any traffic moving on that route, the
                                         carrier initially offering the lowest rate did not benefit any more than
                                         every other carrier meeting its low rate. Because of the lack of any
                                         reward, carriers had no incentive to bid the low rate initially.



                                         Page 17                                       GAO/NSL4DQOdO DOD’s Household Goods Carriers
                    Chapter2
                    Two-PhaseBiddingSystemIs Not
                    Truly Competitive




                    At 13 of the 162 DODshipping offices, we found that after the “me-too”
                    bidding phase all the carriers’ rates were at the low rate levels. At
                    74 more offices, at least 90 percent of the carriers’ rates were at the low
                    rate levels. And at 10 more offices, at least 80 percent of the carriers’
                    rates were at the low rate levels. The average for the 152 offices was
                    83 percent of the rates at the low rate level. The data for all 152 DOD
                    shipping offices during the May 1988 rate cycle are shown in
                    appendix III.

                    For most routes, there was insufficient traffic to allocate to each carrier
                    filing a low rate and, consequently, no guarantee that the initial low bid-
                    der would receive any traffic even though that carrier’s low bid caused
                    the rate for all traffic on that route to be as low as it was. On a route
                    where there were 30 shipments during the contract period and 40 carri-
                    ers meeting the low rate on that route, the carrier initially filing the low
                    rate, if selected, could end up with only 1/30th of the traffic that
                    moved.


                    Because of the opportunity to “me-too” other carriers’ rates and to
“Paper” Companies   share equally in all the available traffic, many carriers have set up sub-
Often Created to    sidiary or subsidiary-like companies to get additional shares of DODtraf-
Increase Market     fit. These created companies are usually nothing more than “paper”
                    companies that operate with the parent companies’ existing resources
Shares              and bid the same rates as their parent companies. Their presence dis-
                    torts the allocation of traffic among the bidders that provide DODits
                    physical hauling capability, yet they neither enlarge the capability
                    available to DODnor add to the bidding competition.

                    Many carriers said that the sole function of the “paper” companies was
                    to gain a larger share of the traffic on a given route. For example, if
                    10 carriers bidding the same rate served a particular installation, each
                    carrier would be in a position to get 10 percent of any traffic generated.
                    If 1 of the 10 established another company, a “paper” company, and bid
                    the same rate, the number of carriers available to share the traffic
                    would be increased to 11, and the parent and its “paper” company
                    would be able to get 2/l lths of the traffic, or roughly 18 percent. This
                    has often led to a distorted allocation of traffic between carriers with
                    “paper” companies and those without them.

                    At the carriers we visited, an individual or a committee within the com-
                    pany was responsible for establishing and filing the rates of both the
                    parent and its “paper” companies. Generally, we found that the rates


                    Page 18                           GAO/NSLAD-90-50 DOD’s Household Goods Carriers




                                                                                        :   1
Chapter 2
Two-Phase Bidding System Is Not
Truly Competitive




for the “paper” companies were the same as the parent company’s rates.
Also, the “paper” companies generally used the physical hauling equip-
ment of their parent companies and thus added nothing to DOD'Shauling
capability.

There are no limits on the number of “paper” companies a company can
establish to serve DODas long as each new company obtains DOD
approval and reaches agreement with an agent to represent it at the
places it intends to offer service. Some carriers, particularly the smaller
van carriers and forwarders, have told us that finding an agent can be a
problem because M T M Cmaintains a rule limiting the number of carriers
an agent may represent. An agent may represent no more than four DOD-
approved carriers, no more than two of which can be forwarders.
Whereas those numbers may have been adequate when carriers did not
have “paper” companies, the proliferation of “paper” companies by the
larger van carriers, which tend to keep the existing agents for their own
carriers, has meant that the smaller carriers sometimes cannot find
enough agents to enter or increase their presence in many markets.

Our review indicated that nearly every large moving van carrier we vis-
ited or spoke with had set up one or more such companies-for exam-
ple, two companies had each set up eight such subsidiaries, Data on 30
of the larger companies providing household goods moving service to
DODand the numbers and types of carriers they control, according to the
May 1988 M T M Crecords, are shown in table 2.3.




Page 19                           GAO/NSLAD-90-60 DOD’s Household Goods Carriers
                                          Chapter 2
                                          Two-Phase Bidding System Is Not
                                          Truly Competitive




Tablel2.3: Principal Carriers and Other
Carrit/rs Under Their Control                                                                                                  Percentage of
       I                                                                                                                       total revenues
       I                                                                                        Number of other                 earned by the
                                                                                                    carriers                        controlled
                                          Principal carrier
                                          .-.~.---__                                          Forwarders Van lines                    carriersa
                                           Affiliated Transportation Systems, Inc.                       1              0                     31
                                                        -______                               -
                                           Albert Moving & Storage                                      8               0                     60
                                          -.._____
                                          Allied Van Lines, Inc.                                        8               0                     59
                                                                                          -__
                                          American Movers                                               2               0                     60
                                          __--                                                 ~___.
                                          American Red Ball Transit Company, Inc.                       2               0                     50
                                                                                           __________.-__
                                          Andrews Van Lines, Inc.                                        1              1                     48
                                          -..____                                                    _____~.
                                           Atlas Van Lines, Inc.                                        3               0                     37
                                             -..-.-____-                                                              ___.__.
                                           Bekins Van Lines Company                                      1              0
                                          --                                                                                            -_- 44
                                           Burnham Service Company, Inc.                                 1              0                     31
                                          -___                                                                         -__.
                                          Cartwright Van Lines, Inc.                                    4               2                     50
                                          - .-____-
                                          Coleman American Moving Services, Inc.                         1              1                     51
                                          Continental Van Lines, Inc.                                    1              0                     37
                                          -~-                           ~-___-
                                          Global Van Lines, Inc.                                        2               3                     59
                                           ..-~~
                                           Interstate Van Lines, Inc.                                    1              4                     65
                                                             ~--
                                          Mayflower Transit, Inc.                                       3               0                     66
                                           National Van Lines, Inc.                                     7        ..-___ 2                     70
                                           North American Van Lines, Inc.                               4               0                     63
                                          -____--
                                           Pacific Van & Storage Company, Inc.                           1              0
                                          --___-..                                                              -                   .-___ 45
                                                                                                        4          -.1                        64
                                          _Paul   Arpin Van Lines, Inc.
                                             ..---_I_-.
                                           Paramount Movers, Inc.                                       3               0                     50
                                          Security Van Lines, Inc. _I___                                 3 ___.____.__3                 --.--~59
                                          Sherwood Van Lines, Inc.
                                                                                                    .____1              0                      1
                                          Starck Van Lines. Inc.                                         2              1                     68
                                          Stevens Van Lines, Inc.                                        1              2                     61
                                                      _-..----__-.
                                          Suddath Van Lines, Inc.                                        2              0                     45
                                                                                                        -__-..
                                          Towne Services Household Goods
                                            Transportation Companv, Inc.                                1              1                      59
                                          Towne                                                         1              1 .-~                  44
                                          ._~~. __Van Lines, Inc.
                                          United Van Lines, Inc.                                        7              0                      60
                                                                   ..______
                                          Von der Ahe Van Lines. Inc.                                   1              2                      43
                                          Wheaton Van Lines, Inc                                        3             0                    -~ 40
                                          Tntal                                                        80            24
                                          Average                                                                                            55
                                          %ased on fiscal year 1987 DOD revenue data.


                      Y




                                          Page 20                                       GAO/NSLADdO-60 DOD’s Household Gwds Carriers
                          Chapter 2
                          Two-Phase Bidding System Is Not
                          Truly Competitive




                          At one time DOD used a two-phase bidding concept to obtain rates for its
Other Bidding Systems     international moves. This concept was similar to the one it now uses for
Ha$e Worked for           interstate moves. However, in 1976, DOD modified the two-phase interna-
Ottier Government         tional bidding system to reward the carrier that offered the low rate
                          first with a guaranteed percentage of traffic on the given route.
Moves
                          The General Services Administration (GSA), which obtains household
                          goods rates for civilian government agencies, uses a single-phase bidding
                          system in which carriers bid against a carrier-adjusted baseline. Nearly
                          all the bids GSA receives are below the baseline and dispersed at many
                          different rate levels.


Incqntive Is Present in   DOD  at one time employed a two-phase bidding concept similar to the
DOD’s International       interstate bidding system to obtain rates for its international moves.
                          W ithout reference to any baseline, carriers bid an initial rate for each
Hogsehold Goods Program   route they intended to serve and were then allowed to “me-too” the low
                          carrier’s rate and to share equally in the available business,

                          In reviewing that system, we concluded in our 1976 report that intro-
                          ducing more competition into the rate-setting process would reduce
                          rates, thereby resulting in savings in transportation costs. Our conclu-
                          sion was supported by the fact that rates on a test route were reduced
                          by an average of 19 percent when the “me-too” concept was modified.2
                          Responding to that report, DOD modified its rate-setting procedure. The
                          carrier offering the lowest rate in the initial bidding cycle was guaran-
                          teed a specific percentage of any tonnage generated. The residual ton-
                          nage was then made available equally to all other carriers who agreed to
                          meet the low rate. Although the “me-too” phase was not entirely abol-
                          ished, its impact was substantially reduced. Incentive in the form of
                          guaranteed tonnage was introduced into the rate process.




                          “Adoption of a Single Method of Shipping Household Goods Overseas-Pros and Cons (GAO/LCD/
                          76-226, May 6, 1976).



                          Page 21                                   GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                            Chapter 2
                            Two-Phase Bidding System Is Not
                            Truly Competitive




                            Competition in the DODinternational market differs from that in the
                            domestic market in part because international carriers have less invest-
                            ment in the physical resources needed to move goods overseas. These
                            bidders are forwarders that arrange for the moves and use other carri-
                            ers’ equipment. They do not provide the actual equipment themselves.
                            In the domestic market, most carriers are motor carriers, and many have
                            made significant investments in equipment. Nevertheless, the expe-
                            riences of DODsuggest that when the original low bidders are rewarded,
                            competition is enhanced.


Th ’General Services        GSAuses a single-phase bidding system in which carriers bid against a
Ad 0 inistration Uses a     carrier-adjusted baseline. It gets a wider disparity of rates, nearly all
                            below the baseline, than does DODunder its two-phase system.
Modified Single-Phase
System for Civilian Moves   Like carriers under the DODbidding system, carriers under the GSAbid-
                            ding system bid rates as a percentage of a baseline. However, the base-
                            line is a carrier-set baseline, and rates apply on an area-to-area basis,
                            with an area consisting of one or more states.

                            After carriers submit their rates to GSA,it reviews the rates on selected
                            routes and asks each carrier to review its filing, without having the abil-
                            ity to see what others have bid. If they desire, carriers may rebid rates
                            at some lower level. GSAofficials said that they have the right to
                            (1) accept any offer without further negotiation, (2) reject any unrea-
                            sonable offer without negotiation, or (3) conduct such negotiation as it
                            deems proper.

                            In 1988, GSAinstituted a practice of returning some rates to carriers say-
                            ing that they were “unreasonably high” or that they “would more than
                            likely not be in your best interests in attracting Government business.”
                            The GSAofficials believe that they have a responsibility to negotiate a
                            certain number of rates. This philosophy differs from that of DODin that
                            M T M Cdoes not select any rates for special negotiation.

                            Under GSA'Scontracts, carriers may adjust their rates downward on
                            three dates during the rate cycle: July 1, October 1, and January 1. The
                            contract with the carriers also permits them to charge a peak season
                            (May 15 to September 30) surcharge on rates, often 10 percent. Some-
                            times the contract also allows an increase related to insurance. In 1988,
                            the allowed increase for each rate was 4 percent.




                            Page 22                            GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                   Chapter 2
                   TwePhase Bidding System Is Not
                   Truly Competitive




                   For every route, we found there are 20 or more rate levels available to
                   move a civilian agency interstate shipment. On a comparable DODship-
                   ment, there are often only a few rate levels. For example, on shipments
                   from central Indiana to Virginia, where both bidding systems had about
                   90 carriers making bids, GSA'sbidding system for the summer 1989 sea-
                   son produced 28 different rate levels, whereas DOD'Ssystem produced
                   only 3.

                   There are differences between the two systems. The biggest is that the
                   carriers can adjust the baseline under the GSAsystem but cannot under
                   the DODsystem. GSArequires carriers to hold their rates for 1 year,
                   whereas DODhas a 6-month rate cycle. Even so, GSAhas been able to
                   obtain many different rate levels- most well below the baseline. The
                   fact that GSAhas been able to get many bidders at many different rate
                   levels raises questions about the value of MTMC'Ssystem, which allows
                   “me-toeing” and does not reward the initial low bidder.


                   Moving industry officials argue that military rates are far lower than
M ilitary Versus   those offered to commercial customers. They cite this point to support
Commercial Rates   their position that the two-phase bidding system provides adequate
                   competition.

                   We believe that because of differences in military and commercial busi-
                   ness, a comparison of commercial and military rates is not valid. For
                   example, no commercial shipper makes as many shipments as the mili-
                   tary in such diverse shipping patterns. Also, commercial shippers typi-
                   cally offer preferred customers discounts, which are normally not
                   disclosed.

                   We have been unable to find data that would allow us to independently
                   verify what rates commercial shippers are actually paying. Under
                   today’s regulatory environment, rates do not have to be made public,
                   and no carrier we met would come forward and show us the precise
                   rates it was charging its largest commercial customers. Sometimes, carri-
                   ers operate as common carriers and list in their tariffs the level of dis-
                   counts they offer commercial customers. The customers are not revealed
                   because the shipper account codes shown with the discounts are kept
                   secret between the carrier and the account holder. Sometimes, carriers
                   operate as contract carriers, and the levels of discounts provided the
                   shippers are also kept secret. A recent Traffic Management magazine
                   survey of van line shippers showed that a majority of the shippers sur-
                   veyed moved household goods shipments under moving van contracts.


                   Page 23                          GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                         Chapter 2
                         Two-Phase Ridding System Is Not
                         Truly Competitive




                         The respondents received an average shipment discount of 32 percent
                         off the published rates, with some receiving discounts as high as 50
                         percent.

                         Although most carrier officials we interviewed said that the military
                         rates were extremely low in comparison to the commercial tariff rates,
                         when we asked them what percentage of their commercial shipments
                         were moving at these tariff rates, the response was usually “few” or
                         “none.” When we asked to see the actual rates they charged their com-
                         mercial customers, all declined our request. We therefore have no basis
                         on which to compare military and actual commercial rates.


                         M T M Chas stated that the primary purpose of the two-step system is to
M ilitary and Industry   allow every carrier the opportunity to offer DODthe lowest possible
Vi4ws                    rates and to allow DODthe opportunity to enlarge its pool of household
                         goods carriers at low rates. In its interstate rate solicitation, it says that
                         the first, or initial, filing period

                         “provides carriers maximum flexibility to establish the specific, compensatory rates
                         at which they desire to move personal property shipments from any origin....”

                         The second filing period

                         “provides carriers with the opportunity to precisely adjust their rates downward to
                         (equal) the lower rates of other carriers established during the I/D [first-phase] fil-
                         ing period.”

                         There are pro and con views on the necessity for a two-phase bidding
                         system. On one hand, some carriers have told us that it is only during
                         the period after the initial rates are bid that the carriers’ agents can look
                         at the competition and assist the carriers in deciding which rates to
                         match and which ones to lower from the initial bidding levels. If carriers
                         were not given the opportunity to meet the low rates, they say, many of
                         their agents would not be able to stay in business and, without agents,
                         carriers could not provide DODwith the capability it needs.

                         On the other hand, other carriers say that MTMC'Stwo-phase bidding sys-
                         tem is basically anticompetitive, or if not anticompetitive, at least
                         unnecessary. They point out that MTMC'Scontinued use of the two-phase
                         bidding system- when coupled with DOD'Straffic allocation procedures
                         under which carriers bidding the same rates have the opportunity to
                         share equally in traffic on a given route-does not provide them with an


                         Page 24                                GAO/NSIAD-SO-50 DOD’s Household Goods Carriers
Chapter 2
Two-Phase Bidding System Is Not
Truly Competitive




incentive to offer their lowest rates during the initial bidding period or
reward them for bidding low rates. They said that a one-phase system
under which a carrier having the lowest rate would be offered all the
traffic it could handle, with only the residual traffic offered to the other
carriers, would be more advantageous to them and to DOD.

The basic problem, this group said, is that for a carrier to make a profit
at low rates, it must have volume. Volume could come from bidding low
rates on certain targeted, typically high volume routes and having the
right to that traffic. Under MTMC'Scurrent procedures, they said, there
are no assurances that such volume can be acquired because M T M Cgives
all other carriers the opportunity to meet the lowest rates during the
second phase of the bidding system.

On the other side of the issue, many in the industry-including   the
larger van carriers- told us that they strongly objected to a one-phase
bidding system. No “winner-take-all” system, they said, would be
advantageous to DODor the industry. First, they said that the group of
carriers advocating the one-phase system has only limited capability to
serve DOD.If DODwere to turn over much of the traffic to these carriers,
it would soon see that its needs would not be met. Moreover, they ques-
tioned whether this group would provide the same level of service that
they provided DOD.

They also said that such a system would have a devastating effect on
agents-the people providing the local packing and warehousing ser-
vices-and, consequently, on DOD.Agents are often located in areas that
depend heavily on military traffic for their livelihoods. If a single car-
rier were to lock up all the traffic at one military installation, such
agents could be forced out of business. The loss of this capability,
including their storage warehouses, they said, would be catastrophic for
DOD.They said that if carriers were not given the opportunity to review
the industry’s first set of rates and then decide on which ones to meet,
DODwould be left with a small group of carriers and agents that would
not be able to serve all of DOD.They believe the result would be that, in
order for DODto find the additional hauling and agent capacity-assum-
ing that it was still around- DODwould have to pay much higher rates
than it is currently paying.

These carriers also said that the bidding system needs to be viewed in
conjunction with the baseline. The same baseline has been used to solicit
rates since 1984. MTMC'Sfailure to adjust the baseline, we were told by
many carriers, has caused military household goods shipment rates to


Page 26                           GAO/NSIAD-90-60 DOD’s Household Goods Carriers
Chapter 2
Two-Phase Bidding System Is Not
Truly Competitive




fall to what they argue are unprofitable levels. The rates have become
so low, they said, that many carriers can no longer offer DODservice
comparable to that offered their commercial customers who are paying
higher rates. Moreover, they believed that DODwill soon find its tradi-
tional moving capability in short supply.

M T M Cadvised us that it is concerned about the loss of moving capability
and the possibility of increased rates, but thus far, it has not seen an
argument compelling enough to adjust the baseline. According to MTMC,
the fixed baseline is useful because it provides a simplified method for
soliciting rates; it allows for uniformity in stating rates; and it does not
have to be adjusted after each solicitation because the carriers can effec-
tively adjust the baseline each time they bid new rates. Nothing compels
them, M T M Csaid, to bid rates that are not compensatory. We agree with
MTMC.

In response to this, the carriers said that M T M Cfails to understand that
they cannot adjust their rates the way M T M Cthinks they can. They noted
that the Consumer Price Index had increased by at least 27 percent since
1983 but that M T M Chad not adjusted the baseline. They said that they
found that the baseline was acting as a real barrier to bidding compensa-
tory rates, or any rate above the baseline. Their experience was that
rates above the baseline had usually not resulted in receipt of any traf-
fic at most shipping offices. Moreover, they said that they feared possi-
ble Department of Justice antitrust investigations should they bid rates
above the baseline. Although Justice has been looking at the interstate
rates for several years, these carriers offered no rationale why Justice
would necessarily want to review all rates bid above the baseline, and
we have not found any either.

Regarding the low rate level, many carriers showed us summary data
indicating that the military rates were extremely low, ranging from 24
to 60 percent below published commercial rates. They said that most of
the cost burden resulting from such low rates was falling on the carriers’
local agents and the owner-operators, who are finding that military traf-
fic is no longer attractive to them during the peak summer shipping sea-
son when DODhas the greatest shipping needs. MTMC,they said, has
placed unacceptable economic pressures on the industry to the extent
that many carrier agents and owner-operators are deciding to withdraw
their commitment of resources to the military.




Page 26                           GAO/NSIAD-90-60 DOD’s Household Goods Carriers
              Chapter 2
              Two-Phase Bidding System Is Not
              Truly Competitive




              These carriers would like to see M T M Cadjust the baseline to reflect the
              commercial rate baseline, the Consumer Price Index, or some other indi-
              cator. Increases to the carriers’ commercial rate baseline are authorized
              by the Interstate Commerce Commission based on industry cost studies.
              Were similar adjustments made to the DODbaseline, the carriers said, DOD
              would still receive discounts but from a higher and fairer level.

              M T M Cdisagrees with this argument. It has consistently taken the posi-
              tion that the carriers still have the ability to adjust their rates every
              6 months when they rebid their rates. We agree with MTMC'Sposition
              that carriers have the prerogative to bid any rate they believe is war-
              ranted. Moreover, we are not convinced that changes in the bidding sys-
              tem would hurt the industry or result in decreased service. The industry
              is made up of many different types and sizes of carriers and many
              agents. We believe that there is ample opportunity to allow the market-
              place to work and still maintain adequate capability for DOD.


              DOD'Stwo-phase system for obtaining rates for moving household goods
Conclusions   is not truly competitive in that it limits the incentive carriers have to
              initially offer low rates. While the second phase of this system has gen-
              erally brought down the initial rates of many carriers, a better method
              would be to encourage carriers to offer their low rates first and then
              reward those with the best offers.

              A one-phase bidding system, whereby all carriers have equal incentive
              to bid the lowest possible rates and those offering the lowest rates are
              rewarded with all the traffic they can handle on the route for which
              they are the low bidders, would probably provide the carriers the most
              incentive to offer their lowest rates initially. If DODdetermines that such
              a bidding system would not provide it the moving capability it needed or
              would result in an unacceptable quality of service, it could modify the
              two-phase bidding system so that the carrier offering the lowest rate
              during the first phase is allocated a greater share of the traffic than any
              other carrier simply meeting the low rate.

              There is no way to predict with any certainty the impact that eliminat-
              ing the second phase of the two-phase system or modifying the system
              would have on the rates offered to DOD.On some routes, those with rela-
              tively low volumes of shipments, the rates might increase. But, on the
              higher volume routes, we would expect that the marketplace, often
              involving more than 50 carriers, would produce lower rate levels.



              Page 27                           GAO/NSIAD-90-50 DOD’s Household Goods Carriers
--
                 Chapter 2
                 Two-Phase Bidding System Is Not
                 Truly Competitive




Rebommendation   MTMC   to replace or modify the current two-phase bidding process so that
                 all carriers have incentive to initially bid the lowest possible rates and
                 the lowest bidder is rewarded for offering the lowest rate.




                  Page 28                          GAO/NSIAD-90-60 DOD’s Household Goods Carriers
-&portunities to Reduce Storage Costs


                     The Department of Defense has no overall data showing how much the
                     Department has spent on temporary storage, how many shipments have
                     gone into storage, or how often shipments have been stored prior to
                     delivery. The Military Traffic Management Command, however, esti-
                     mates that in fiscal year 1988 the Department of Defense spent about
                     $114 million to temporarily store household goods and unaccompanied
                     baggage when members moved to new permanent duty stations. This
                     storage is referred to as “storage-in-transit.”

                     Goods were generally stored in transit because members were not in
                     positions to receive their personal effects at their new duty stations
                     when deliveries were attempted. Often, members had not found ade-
                     quate and/or affordable housing; receiving units had not been able to
                     contact members to arrange for delivery; or shipments had arrived at
                     destination before the personnel.

                     Storage costs could be reduced by using storage at origin instead of at
                     destination because storage at origin is generally chargeable at dis-
                     counted or lower long-term storage rates. Also, reducing the incidence
                     and/or the cost of storage should be possible through better coordina-
                     tion and communication among shipping activities, members, carriers,
                     and receiving activities.


                     When moving to new permanent duty stations, military members are
Storage-in-Transit   entitled to temporarily store their household goods or unaccompanied
Entitlements and     baggage at government expense. This basic entitlement lasts for 90 days
Management           from the date the goods are placed into storage. It can be extended by
                     the authorizing transportation officer for up to two additional go-day
Re$ponsibilities     periods if requested by the member because of conditions beyond the
                     member’s control. Any subsequent extension must be approved by a
                     major command-level official or as otherwise dictated by the member’s
                     branch of service.

                     Reasons for extending storage beyond the basic go-day period include
                     serious illness of the member, serious illness or death of a member’s
                     dependent, impending assignment to government quarters, directed tem-
                     porary duty after arrival at the new duty station, the nonavailability of
                     suita.ble civilian housing or incomplete residence construction, and acts
                     of God.

                     MTMC establishes storage-in-transit policy by issuing and revising the DOD
                     Personal Property Traffic Management Regulation, which is approved


                     Page 29                          GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                      Chapter 3
                      Opportunities to Reduce Storage Costs




                      by the military services, M T M Cfield office personnel make management
                      assistance visits to each DODshipping office and provide written reports
                      to M T M Cheadquarters. Over the last 3 years, storage-in-transit has been
                      a special agenda item for these visits,

                      Most management of storage-in-transit occurs at the installation level.
                      According to the DODPersonal Property Traffic Management Regulation,
                      an installation transportation officer may use storage-in-transit when
                      necessary to meet a member’s requirements. However, the transporta-
                      tion officer is to make every effort to prevent the unnecessary use of
                      storage-in-transit by maintaining a close liaison with installation person-
                      nel assignment officers and housing officers, To aid in limiting storage-
                      in-transit, the destination transportation officer is expected to establish
                      a file for inbound personnel. This file includes advanced documentation
                      received from the origin transportation officer and other member infor-
                      mation such as telephone numbers, temporary address, and name and
                      address of a local contact. This file can then be used to facilitate the
                      delivery of household goods rather than putting them in storage-in-
                      transit.

                      Once household goods have been placed in storage-in-transit, installation
                      transportation office personnel monitor the member’s storage entitle-
                      ment. Transportation office personnel advise the member of when this
                      entitlement is about to expire and what is required to extend it. Installa-
                      tion transportation office personnel also advise carrier agents that mem-
                      ber storage entitlements are about to expire.


                      Carriers’ charges for storage-in-transit are based on five elements: (1) a
Cdrrier Charges for   charge per hundred pounds for the first day of storage, (2) a charge per
Stbrage-in-Transit    hundred pounds for each additional storage day, (3) a charge for insur-
Services              ance, (4) a charge per hundred pounds for warehousing, and (5) a
                      charge per hundred pounds for delivery from the warehouse. For exam-
                      ple, the applicable charges for a 5,000-pound shipment stored in north-
                      ern Virginia during the May 1988 rate cycle for 5 days would be $618.45
                      ($50.50 for the first day of storage, $3.50 for each additional day of
                      storage, $6.45 for insurance, $105.00 for warehousing, and $442.50 for
                      delivery from the warehouse to the member’s residence).

                      M T M Cinitially established the storage-in-transit rates through negotia-
                      tions with the carrier industry, using as a basis rates published in the
                      1985 Household Goods Carriers’ Bureau’s military rate tender. These
                      rates are established geographically, according to where the household


                      Page 30                                 GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                         Chapter 3
                         Opportunities to Reduce Storage Costs




                         goods are stored. Since the rates were first established, M T M Chas revised
                         the rates once, based on the estimated September 30,1987, Consumer
                         Price Index. Rates for storage-in-transit at destination are not subject to
                         the percentage discounts or premiums that carriers bid for the transpor-
                         tation discussed in chapter 2.


                         Although M T M Chas estimated the cost of storage-in-transit, neither M T M C
Sqhmary Data on Cost     nor the military services compile data on the actual cost of storage-in-
an Extent of Storage-    transit, the number or percentage of shipments going into storage-in-
in-dT
   ) ransit Is Lacking   transit, or the amount of time shipments are in storage-in-transit. Much
                         of the data is available only at the installation level and then only on a
                         shipment-by-shipment basis.

                         For fiscal year 1988, M T M Cestimated the cost of storage-in-transit to be
                         about $113.8 million: $78.5 million for about 130,000 domestic house-
                         hold goods shipments, $25.6 million for about 112,000 international
                         household goods shipments, and $9.7 million for about 107,000 unac-
                         companied baggage shipments. These estimates are based on a formula
                         developed by MTMC,which estimated the number of shipments in stor-
                         age-in-transit, the median time in storage-in-transit, the average weight
                         per shipment, and the average storage-in-transit rate. Because of the
                         many estimates, a M T M Cofficial questioned the reasonableness of the
                         storage-in-transit estimate.

                         The only actual cumulative storage-in-transit cost data we obtained
                         from M T M Cwas generated for us from individual shipment documenta-
                         tion the Navy provided to MTMC.This data, which is not used by M T M C
                         and is based on shipment pickup dates, showed that for fiscal year 1988
                         storage-in-transit cost the Navy about $20.4 million for about
                         33,000 domestic household goods shipments.

                         Each of the 10 shipping or receiving offices we visited maintained indi-
                         vidual household goods shipment records including storage-in-transit
                         data associated with each shipment. These records included the date
                         each shipment had gone into and come out of storage. In addition, the
                         offices maintained logs listing the storage-in-transit shipments and the
                         dates they had gone into storage.

                         Some of the shipping or receiving offices also generated work load
                         reports, which stated the number of shipments processed and the
                         number of shipments that had gone into storage-in-transit. On the basis
                         of these work load reports and other data, we found that for 9 of the


                         Page 31                                 GAO/NSLAD-9040 DOD’s Household Goods Carriers
                     Chapter 3
                     Opportunities to Reduce Storage Costs




                     10 offices we visited, over 50 percent of the personal property ship-
                     ments they received-either household goods or household goods and
                     unaccompanied baggage-had gone into storage-in-transit. At the other
                     office, about 45 percent of the domestic household goods shipments it
                     received had gone into storage-in-transit.

                     At 9 of the 10 offices we visited, the only records we found concerning
                     the length of time shipments had been in storage-in-transit were those
                     showing the date a shipment had gone into storage and the date the
                     shipment had come out of storage. These records showed that shipments
                     had been stored for as little as a few days to over 270 days. The other
                     office had done a study on how long shipments were in storage-in-
                     transit, and its data showed that the longest time a shipment had been in
                     storage at that installation was 7 months, and typically the shipments
                     were in storage between 21 and 30 days.


                     Goods were generally stored in transit because members were not in
Major Reasonsfor     positions to receive their personal effects at their new duty stations
Storage-in-Transit   when deliveries were attempted. Often, members had not found ade-
                     quate and/or affordable housing; receiving units had not been able to
                     find members to arrange for delivery; or shipments had arrived at desti-
                     nation before the personnel.


Lack of Housing      One major reason that household goods are placed into storage-in-transit
                     is the lack of available and/or affordable housing. For example, accord-
                     ing to a shipping office official at Cameron Station, Virginia, in over
                     50 percent of the cases in which shipments go into storage-in-transit,
                     members do not have housing. Most of the installations covered by the
                     offices we visited did not have available on-base housing. Most installa-
                     tions had waiting lists for on-base housing of at least several months,
                     the length depending in part on the member’s rank. According Co a ship-
                     ping office official at the Naval Supply Center, San Diego, California,
                     members of the installation must wait for 18 months to 4 years for on-
                     base housing.

                     Similar problems exist concerning off-base housing. At most of the
                     installations we visited, adequate and/or affordable off-base housing is
                     not available. According to an Army personal property official at the
                     Pentagon, housing problems at Ft. Ord, California, had resulted in the
                     extension of DODstorage-in-transit entitlements beyond 180 days with
                     no definite limit.


                     Page 32                                 GAO/NSIADdO-50 DOD’s Household Goods Carriers
                      Chapter 3
                      Opportunities to Reduce Storage Costs




Locdting Members Is   Goods are often stored in transit because installation transportation
Difficult             office personnel have difficulty locating military members when their
                      household goods are ready for delivery. The problems are that there is
                      only a limited amount of time available to locate the members, and mem-
                      bers (1) have not arrived at their new duty stations, (2) have arrived at
                      their new duty stations but have not contacted the installation transpor-
                      tation offices, or (3) have arrived at their new duty stations but are
                      unavailable to receive the goods. If members or their designated repre-
                      sentatives cannot be located, their household goods will be put into
                      storage-in-transit. According to an official at one installation, over
                      SO percent of household goods shipments arrived there before members
                      had reported to the base locator.

                      According to MTMC'Srate solicitations for household goods, once a car-
                      rier’s representative advises an installation transportation office that a
                      member’s household goods are ready to be delivered, delivery of the
                      goods must begin within 2 hours for domestic shipments-when the dis-
                      tance between pickup and delivery is 200 miles or more-and within
                      3 hours for international shipments. Otherwise, DODwill be charged $17
                      for each additional hour for nondelivery plus hourly charges for vehicle
                      drivers and helpers. This nondelivery, or waiting time, is calculated at
                      the discretion of the carrier’s representative. Generally, it is less costly
                      to pay for waiting time up to 8 hours than to put goods into storage.
                      However, if transportation office personnel cannot locate military mem-
                      bers within a few hours to begin delivery of household goods, the goods
                      will usually be put into storage-in-transit.

                      According to the DODPersonal Property Traffic Management Regulation,
                      members are to contact the responsible destination installation transpor-
                      tation officer immediately upon arrival and provide contact addresses
                      and telephone numbers where they can be reached to arrange delivery.
                      However, we found that members had not always reported to the trans-
                      portation officer upon arrival because they believed that their goods
                      would not be delivered until the required delivery date, which had been
                      established prior to the time of pickup. Therefore, they believed that
                      they did not need to contact the transportation officer until the required
                      delivery date.

                      Deliveries of household goods are based on required delivery dates
                      established by the shipping offices in discussions with members before
                      their goods are moved. However, unless computations of required deliv-
                      ery dates include other than actual transit times, such as leave, the
                      required delivery dates may be unrealistic.


                      Page 33                                 GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                             Chapter 3
                             Opportunities to Reduce Storage Costs




                             Members may report to their new duty stations but be unavailable to
                             receive their household goods for several reasons: members may be on
                             travel, on temporary duty, aboard ship, or on duty for extended periods
                             of time.

                             Also, members may change their minds as to when they will report to
                             their duty stations or fail to include some leave time in their required
                             delivery date calculations.

                             Members may be granted latitude in reporting to their new duty sta-
                             tions; orders may state that they must report to their new duty stations
                             within a given month. According to personnel at two installations we
                             visited, members sometimes believed that required delivery dates were
                             the actual dates that their household goods would be delivered. There-
                             fore, members often did not report to their new stations before the
                             required delivery dates. The installation transportation office personnel
                             said that this misunderstanding might have resulted from improper
                             counseling at the origin transportation office.


Carriers Are Not Penalized   In some cases, carriers themselves contribute to storage-in-transit. One
                             factor DODuses to measure carriers’ performance is how well the carri-
for’Early Delivery Even If   ers meet the agreed-upon required delivery dates. Carriers failing to
It CausesStorage-in-         meet these dates may be suspended, or their performance scores low-
Transit                      ered. Yet carriers who deliver shipments early and create the need for
                             storage are not penalized.

                             The incentive for storage rests mostly with the carriers’ agents. Most of
                             the storage revenue is kept by the destination agents, and the possibility
                             of additional revenues from military traffic is used by the carriers as an
                             inducement to have agents represent them at shipment destinations.


                             Storage at origin, when it can be determined that some storage will be
C&t and Incidence of         needed, is more cost-effective than storage at destination because it is
S&rage Can Be                chargeable at discounted or lower long-term storage rates. Reducing the
Rdduced                      incidence and/or the cost of storage should be possible through better
                             coordination and communication among shipping activities, members,
                             carriers, and receiving activities. Such coordination includes ensuring
                             that the shipping/receiving offices know when the members can take
            ?                possession of their goods at destination, the members give the shipping/




                             Page 34                                 GAO/NSIAD-SO-60 DOD’s Household Goods Carriers
                            Chapter 3
                            Opportunities to Reduce Storage Costs




                            receiving offices addresses where they can be located when the house-
                            hold goods are expected to be delivered, and all parties know when car-
                            riers are planning to deliver the goods.


Use /of Storage at Origin   The Joint Federal Travel Regulations provide that nontemporary stor-
                            age and storage-in-transit at origin may be used to store members’
                            household goods when it is in the best interest of the government to do
                            so. However, we found that in some cases involving lack of housing,
    ~                       temporary duty assignments, and duty at sea, storage-in-transit at desti-
    I                       nation was used instead of storage at origin.

                            For example, the Navy personal property transportation regulation enti-
                            tles members to nontemporary storage when they are ordered to new
                            permanent duty stations within the United States and their orders indi-
                            cate a scarcity of available or adequate civilian housing at their new
                            duty stations. At the two Navy installations we visited, civilian housing
                            is scarce, yet many members’ household goods shipments are in destina-
                            tion storage-in-transit.

                            In addition, officials at several receiving offices we visited stated that
                            storage costs could be reduced if members used storage-in-transit at ori-
                            gin while they are on temporary duty assignments or assigned to duty at
                            sea.

                            Finally, many shipments are being taken from nontemporary storage at
                            origin and placed into storage-in-transit at destination, According to one
                            carrier we met with, about 40 percent of shipments coming out of non-
                            temporary storage go into storage-in-transit at destination. Several car-
                            riers advised us that shipments should not come out of nontemporary
                            storage until members provide actual delivery addresses. If the ship-
                            ments had remained at origin, the costs could have been reduced. In
                            addition, according to several carriers, it is beneficial to the member not
                            to have goods moved from one warehouse to another because the goods
                            can be damaged during each move.

                            Nontemporary storage is generally less costly than storage-in-transit at
                            destination. For example, a lO,OOO-poundhousehold goods shipment
                            stored in the Washington, D.C., area (shipment origin) at nontemporary
                            storage rates would cost about $1,200 for 180 days. Storing the same
                            shipment would cost about $1,730 for 180 days at storage-in-transit des-
                            tination rates in San Diego, California. Adding 10 percent to the storage-
                            in-transit cost for carrier liability insurance, which is not charged for


                            Page 35                                 GAO/NSIAD-SO-50 DOD’s Household Goods Carriers
                          Chapter3
                          Opportunities   to Reduce Storage Costs




                          nontemporary storage, results in about $1,900 in storage-in-transit
                          costs, or almost 60 percent more than the nontemporary storage costs.

                          Storage-in-transit at origin is also less costly than storage-in-transit at
                          destination because origin storage rates are subject to the percentage
  ,                       discounts carriers bid for the line-haul rates and destination storage
                          rates are not. The differences can be as much as 50 percent or more in
                          some instances.


Be(ter Coordination       As we noted above, members do not always report to the transportation
                          officer upon arrival because they believe that their goods will not be
                          delivered until the required delivery date. Also, unless the computation
                          of the required delivery date includes time other than actual transit
                          time, such as leave, the required delivery date may be unrealistic. And
                          carriers who deliver shipments early and create the need for storage are
                          not penalized.

                          Considering these matters, good coordination and communication among
                          shipping activities, members, carriers, and receiving activities is impor-
                          tant if storage management is to be effective. This coordination includes
                          ensuring that the shipping/receiving offices know when the members
                          can take possession of their goods at destination, the members give the
                          shipping/receiving offices addresses where they can be located when
                          the household goods are expected to be delivered, and all parties know
                          when carriers are planning to deliver the goods.


                          Storage-in-transit cannot be totally eliminated, but the cost, and possibly
Cdnclusions               the incidence, can be reduced. To accomplish these reductions, DOD
                          should select the type of storage that is most advantageous to the mem-
                          ber and DOD, and shipping activities, members, carriers, and receiving
  ,                       activities should more closely coordinate their efforts.


                          We recommend that the Secretary of Defense direct the military services
R{commendations           to take the following actions:

                      l Use nontemporary storage and storage-in-transit at origin to the extent
                        possible, rather than the more costly storage-in-transit at destination.
             Y
                      . Take steps to ensure better coordination and communication among DOD
                        shipping/receiving offices, carriers, and military members in the deliv-
                        ery of household goods.


                          Page 36                                   GAO/NSIAD-SO-60 DOD’s Household Goods Carriers
Page 37   GAO/NSlAD-SO-60 DOD’s Household Goods Carriers
Appendix I

Companies Visited by GAO



              A Olvmpic Forwarder, Inc.                        Lvnnwood, Washington
              AD McMullen, Inc.                                North Dartmouth, Massachusetts
              Air Van Lines International, Inc.                Bellevue, Washington
              %erti Van & Storage Company, Inc.                Gaithersburg, Maryland                   -
              Allied Van Lines, Inc.
              --                                               Naperville, Illinois
              American Ensian Van Service, Inc.                Long Beach, California
              American
              ~-          Red Ball Transit Company, Inc.       Indianapolis, Indiana
              Crowder Transfer and Storage                     Alexandria, Virginia
              Culver Moving & Storage                          San Antonio, Texas
              .-Door-to-Door Moving & Storage                  St. Louis, Missouri
              Global Van Lines, Inc.                           Orange, California
              Interstate Van Lines, Inc.
              ____-                                            Springfield, Virginia
              Mavflower Transit, Inc.                          Indianapolis, Indiana
              National Van Lines, Inc.                         Broadview, Illinois
              New-Bell Storaae Corooration                     Norfolk, Virainia
              North American Van Lines, Inc.                   Ft. Wayne, Indiana
              Pan   American Van Lines, Inc.
              _--_I____-                                       Long Beach, California
              Paul Arpin.--__
                           Van Lines, Inc.                     East Greenwich, Rhode Island
              RFC World-____.-
                         Wide                                  San Antonio, Texas
              Sherwood Van Lines, Inc.                         San Antonio, Texas
              Stevens Van Lines, Inc.                          Saginaw, Michigan
              $uelzer Van Lines
                              _____.__                         Ft. Wayne, Indiana
              Towne Van Lines, Inc.
                                --                             San Antonio, Texas
              United Van Lines, Inc.                           Fenton, Missouri
              Wheaton Van Lines, Inc.                          Indianapolis, Indiana




              Page 38                                      GAO/NSIAD-SO-SO DOD’s Household Goods Carriers
WD Shipping Offices Visited by GAO


                       Joint Personal Property Shipping Office-Washington, Cameron Station,
Amiy Offices           Alexandria, Virginia
                       Fort Hood, ?ex&
                       Fort George G. Meade, Maryland
                       Fort Benjamin Harrison, Indiana


                       Naval Supply Center-San Diego, California
Nav’YOffices           Naval Training Station-Great Lakes, Illinois

    ,
                       Joint Personal Property Shipping Office-San Antonio, Texas
Air Force Offices      Scott Air Force Base, Illinois


                       Marine Corps Air Station-El Toro, California
Marbne Corps Offices   Camp Pendleton, California




                       Page 39                           GAO/NSIAD-90-60 DOD’s Household Goods Carriers
                                                                                              .
Aphendix III

Shipping Offices’Carrier, Rate, and Work
Ibad Data

                In table III. 1, we list data covering the routes from the 152 DODshipping
                offices in the contiguous United States for the May 1988 rate cycle. A
                “route” covers all traffic offered to industry from a single shipping
                office to all points in one destination state or the District of Columbia.
                Thus, from each shipping point there are 49 routes.

                In presenting figures, we have averaged the numbers of carriers offering
                rates and the low rate from each DODshipping office. Therefore, in Fort
                McClellan’s case, we have averaged the numbers of carriers offering
                rates from Fort McClellan’s office to each of the 49 destinations to
                which it ships. For all of its destinations, an average of 58 carriers sub-
                mitted rates.

               Our column “Average low rate from shipping office” represents the
               average low rate, stated as a percentage of MTMC'Sbaseline rate, for all
               destinations from Fort McClellan, in this case, 82 percent. Our next col-
               umn indicates the percentage of carriers’ rates at the low rate level for
               all of Fort McClellan’s destinations, In this case, 60 percent of all the
               carriers’ rates were at the low rate level. Column 4 represents the aver-
               age number of interstate shipments per day from Fort McClellan to all
               49 of its shipment destinations, and column 5 represents the average
               number of interstate shipments per day from Fort McClellan to its desti-
               nation with the highest volume of shipments.




               Page 40                            GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                                                   Shipping Offices’ Carrier, Rate, and Work
                                                   Load Data




Table lll,l: Comparison of DOD Shipping Offices’ Data
          I                                                                      Average IOW      percentage of      Average nuzy; o;oshipments
                                                               Average              rate from     carriers’ rates               P     Y
                                                              number of              shhp~            at low rate                 All Highest volume
Shipping office                                                 carriers                                     level     destinations       destination
Alabama                                                        ----
  Fort McClellan                                                         58                82                  60                3.8                  0.6
  Fort Rucker                                                            92                69                  65                7.0                  1.1
                                                                                      -
  Maxwell Air Force Base                                                 62                99                  96                7‘7                  1.3
  Redstone Arsenal                                                       62               100                -100                2.8      -           0.4
                                                                                                                                                       -.
                                                                      ______
Arizona;
  DavisJMonthan Arr Force Base
                                                               ----__ 65 ------98
                                                                               ___           .-                93                2.9                  0.6
  Fort Huachuca                                                    __.-- 50               100                  97                4.1                  0.4
  Marine Corps Air Station, Yuma                                         20               100                 100                1.7                  0.4
                                                                     .-
Arkansss Air Force -Base
  Willrams                     ~-                                        70                70                  67                7.1      ____-       1.0
                                                                                                                                                   _---
  Eaker’Arr Force Base                                                36                  100                  99                1.4                  0.2
                                                                   -___
  Fort dhaffee                                             --____.    45                  100                  99                0.9                   0.1
  Little Bock Air Force Base                                          92                   90                  91                3.4      ____-       0.4
Califor4a
  Beale’Air Force Base                                                   60         100                        99               3.4                   0.4
                                                      - ~~~.~---~
  Castle Air Force Base..                                                55                 65                 52               2.4                   0.4
  Edwards Air Force Base                                                 32                100                 96               1.5                   0.2
  Fort drd                                                              156~-.       -._____66                 54              12.2
                                                                                                                       ____--___~                     1.5
  Geor9e Arr Force Base                                                  49                100                 99               1.1
                                                                                                                          ______-___---               0.2
                                                                                   ________
  Marine Corps Air-Ground Combat Center,
    Twentynine Palms                                                  38                100                  100                2.1                    0.3
                                                                                        --__
  Mar&+ Corps Air Station, El Toro            ~.    ---.             139                 65                   42               10.6            _~.__ 1.1
                                                                                                  ___
  Mart& Corns B&e, Camp Pendleton                                     87        ___.__-  65                   49                8.1                    1.1
       ‘                                             --._-....         _____... -.-
  Marine Corps Lo,o&cs ~. Base. Barstow                               47                100                   99                0.7                    0.l
                                                                              __-~
  McClellan Air Force Base                                - .~. ----.-~..~      ___-- 66                      50                5.2                    0.8
  Naval Air Facility, El Centro                                         6_.---          100                   84           ____ 0.0                    0.0
  Naval Air Station, Lemoore                              ~--__       65                100                   99                1.4                    0.2
                                                                         __~
  Navaj Construction Battalion Center, Port Hueneme                   46                 83                   74                1.6                    0.2
  NavaiSupply Center, Oakland                                       206                  66                   52               13.1                    1.3
                                                          _...__-
  Navai Sup~lv
           ., , Center, San Diego                                    148                 65                   49               19.0                    2.9
  Naval Weapons Center, China Lake                                      6               100                   84           -    0.3                    0.1
  Norton Air Force Base                                               95                 91                   84                5.0                    0.6
  Sharpe Army Depot, Lathrdp                                          50                 75                   47                ET--                   0.0
  Vandenberg Air Force Base                                           75                 73
                           f                                                                            ____ 52                 2.1                    0.2
                                                                                                                                              (continued)




                                                   Page 41                                         GAO/NSIAD-9060 DOD’s Household Goods Carriers
                                                                                                                                                                    .
                                                                         Appendix I[I
                                                                         Shipping Offices’ Carrier, Rate, and Work
                                                                         Load Data




.--I----~.---




                                                                                                  Average low        Percentage of      Average nu:rb;; o:oahiPments
                                                                                      Average        rate frpm       carriers’ rates
                                                                                    number of         shii ,f;i          at low rate                All Highest volume
Shigping office                                                                       carriers             P                    level    destinations       destination
Colbrado
                J*int Personal Property Shipping Office-Colorado
                  ~Springs                                                                 124               70                   63              14.4                  1.6
                Lbwrv Air Force Base                                                       123               71                   68               7.2                  1.0
                  !   ’
Cotjnecticut
                Nbvai Submarine Base, New London                                            62               76                   80               4.8              0.i
Delbware
                Dover Arr Force Base                                                        55               70                   60               3.6              0.5
Floiida
                Eblrn Arr Force Base                                                       106               96                   96               4.5              0.5
                                                                 ___-
                Homestead Arr Force Base                                                    75               82                   66               3.5              0.6
                I\ljacDill Air Force Base                                                  134               70                   59               3.8              0.4
                r\iaval Air Station, Key West                                               23              100                  100               0.6              0.1
                r\javal Supply Center, Pensacola                                           132               95                   94               8.2              1.7
                Naval Supply Center, Jacksonville                                          122               71                   70               9.5              1.3
                r\javal Training Station, Orlando                                           89               70                   56               5.4              1.1
                Patnck Air Force Base                                                       51              100                   97               2.8              0.2
                Tyndall Air Force Base                                                      50               94                   92               2.6              0.3
Gebrgia
                 iort Bennrng                                                               80              100                   97               9.3              1.3
                                                    ..-~~.--
                 Port Gordon                                                                70               76                   67               5.0              0.5
                                                        ---.- -....---
                 Fort McPherson                                                            110              100                   97               5.7              0.7
                 Port Stewart                                                               70               70                   61               7.6              0.9
                .f$ranne Corps Logistics Base, Albany                                       30              100                   89               1.1              0.2
                 lvloody Air Force Base                                                     19              100                   98               1.4              0.2
                 iaval SUDDIV
                           ,r, I
                                 Corbs
                                    I
                                       Schools. Athens                                      31              100                   96               0.4              0.1
                 Robrns Air Force Base                                                      67              100                   94               2.6              0.2
                                        _ ~-- .--.~
 Idiho                              ~...------_-~
                tvlountain Gome Air Force Base                                               27             100                   96               2.2              0.4
                $aval Administrattve Unit, Idaho Falls                                       18             100                   94               1.9              0.6
 Illitjois                                       ~.....-.---______-
                Chanute Air Force Base                                                      31              100                   86               3.6               0.4
                Charles Melvin Price Support Center, Granite City                          102               73                   72               4.2               0.5
                kaval Tratnrng Station, Great Lakes                                        136               73                   68              13.7               3.0
                                                       ______~
                iock Island Arsenal, Rock Island
                                           ~_~ .~~___.
                                                                                            52              100                   96               1.7               0.2
                Scott Air Force Base                                                        98              100                   97               6.1               0.8
                                                                                                                                                            (continued)




                                                                         Page 42                                      GAO/NSIAD-@O-50 DOD’s Household Goods Carriers
                                                                   Appendix III
                                                                   Shipping Offices’ Carrier, Rate, and Work
                                                                   Load Data




                                                                                                   Average IOW    Percentage of     Average number of shipments
                                                                                   Average            rate from   carriers’ rates              per day to
                                                                                  number of            shi~~~~~       at low rate                All Highest volume
Shlppln office                                                                      carriers                                level     destinations        destination
    - -.‘--‘-0 -’ ..-..“‘--..-----..-~.-----
‘!!!B”” I ..,..... . ..-. ...(. ._...- .._-......-- - ---.-
    pBJc&l!c~!~~~i..                                                                         80             100               98                4.4                  0.4
                                                                        _--                  50             100               98                2.1                  0.3
   Naval beapons Support Center,
                         _....-.- ..-Crane
                                     --.-----.-.-.                         ______-           61             100               99                1.1                  0.2
Kansas T
   Fort Leavenworth                                                                         108             73                35                8.8                  1.0
   Fort Rjley                                                                                72            100                99                6.3                  0.7
   McCo nell Air For& Base                                                               --- 64            100                99                1.9                  0.3
Kentuc if y
   Fort Campbell                                                                            117            100                99               10.3             -__ 1.1
   Fort Knox                                                                                103             83                69                7.4                 0.9
   LexrngtonBlue --.
                  Grass Army   Depot,
                          -.-. --~      Lexington
                                   . . .__.
                                         - .._._._
                                                -----____--.-                                77            100                96                1.6                 0.2
LouislarIa
   Barksdale Air-Force Base                                             _____-               67             100               99                3.5                  0.5
   England Arr Force Base                                                                    23             100               99                1.7                  0.2
   Fort Polk                                                                                 76             100               99                4.7                  0.7
   Naval hupport Activity, New Orleans                                                       82             100               97                4.7                  0.8
                                                              ____._.~__...                              --
Maine *                                                                       ___.
   Loring’ Air Force Base                                                                    36             99                92                1.5                  0.2
   Naval Air Station, Brunswick                                                              59             71                58                2.3                  0.3
Marylahd
   Aberdeen Proving Ground                                                                    97___-        82                59                2.5                  0.4
   Fort Detnck                                                                                38           100                93                1.4                  0.2
   Fort George Meade-        -~                                              ..___ .~- 102                  82                61                6.0                  0.8
   Naval iAir Station, Patuxent River                  ~_ _. ~..--___        - .._-- ._...-~~ 21
                                                                                              .~~          100                95                1.8                  0.3
   US. Naval Academy, Annapolis                                                               30            99                96                1.1                  0.2
Massadhusetts
   Hans ‘om Air For&‘Base                                                                   103             71                50                7.2                  0.8
       4
Michigqn
   K. I, S!z&yer Air Force Base                                                           59                74                76                1.9                  0.3
   Selfridge Air National Guard Base                                                     101                74                70                5.8                  0.9
   Wurtsmith Air For&Base                                               _~     __-.-_._- -..55              74                70                1.6                  0.3
lknnesbta
   Fort Snelling                                                                             88             73                62                3.3                  0.6
                                     -..
Mississippi
   Columbus Air Force Base                                                                   42            100                97                4.0                  0.7
                                                                                     -   -.-.____-
   Keesler Arr Force Base                                                                   150             99                96                6.8             __-  0.9
  .Naval’A/r Station, Merid?&                 ~-                                             49            100                99                1.7_____~            0.3
                                                                                                                                                            (continued)




                                                                  Page 43                                          GAO/NSIAD-90-50 DOD’s Household Goods Carriers
                                                       Appendix III
                                                       Shipping Of%lces’Carrier, Rate, and Work
                                                       Load Data




     I                                                                            Average IOW     Percentage of      Average nurrb;; o;;hipments
                                                                  Average            rate from    carriers’ rates                     Y
                                                                 number of            Shigv&          at low rate                 All Highest volume
Shiqping office
          . _....     -..---.-.                                    carriers                                  level     destinations       destination
Missouri
  Fort Leonard Wood                                                          78            100                 99                3.9               0.4
  Whiteman Air Force Base                                                    36            100                 99                1.4               0.1
Modtana                                                                 -                                                                      .___-
  Mglmstrom Air Porte Base                                                   53            100                 99                2.4       -____ 0.2
Nebraska
  Oifutt Air Force Base                                                     109            100                 97                8.8               1.1
Nevbda
  N{val Air Station, Fallon                                                  30            100                100                0.5               0.2
                                      ___.
  N$“is Air Force!$s~-                                                       67            100                 98                4.8               0.6
  Sierra Army Depot, Reno                                                    32            100                100                0.7               0.2
Nei Hamoahire
  Pease Air.Force Base            .-.._ __-____.                             56            100                 99                3.7               0.5
New Jersey -
  Joint Personal Property Shipping Office-New
     Jersey, Fort DIX                                                       121             71                 50                7.7               0.9-
   .,.
New Mexico
  &-rnon Air Force Base                                                      51            100                 99               1.6                02
                                                                                                                                             .__
  Hblloman Air Force Base                                                    46            100                 98               3.1                0.4
  Kktland Air Force Base                                                                   100                                  3.8
  White Sands Mrssile Range                                                  29            100                100               1.2                -0.3
NeW York                                           .____-
   Fort Drum                                                                 53            100                100               1.2            -__ 0.2
   Fort Hamilton        -                                                   116             71                 39               4.7        ---     0.6
 .‘Giriffiss Air Force Base                                                  56            100                 99               2.6                0.2
                            -.~ ..~._-_I_~...
   N&al Administrative Unit, Scotia                                          51            100                 98               3.7                0.7
                                              .-.--.--
  Piattsburah Air-Force Base                                                 33            100                 90               2.0                0.3
  Seneca Army Depot, Romulus                                                 52             97                 88               2.8                0.4
                                -~~~ .___                          .-
  U.S. Military Academy, West Point---____                                   80             99                 92               2.2    .-____-     0.5
No$h Carolina                 -. ~~~
  Marine Con&B&e,      Camp
                        .~ ..~ Leieune..---__-.--_.-                        112             71                 70              10.1                1.9
                                                                                                                                             .-
  Fbrt Bragg                         ~. -.-                                 144             97                 89              19.9                2.3
  Marine Corps Air Station, Cherry Point
                                  -_ ..---
                                                                             73             67                 62               3.9                0.6
  Seymour Johnson Air _~~~~
                         Force~~-____-
                                   Base                                      70             98                 95               3.4                0.4
                                                  __--
N&Ah Dakota                                                                                                                    ___
  Grand Forks Air Force Base                                                48             100                100               3.1                0.4
  Minot Arr Force Base                                                      46             100                100               3.3                0.3
                     *                                                                                                                    (continued)




                                                       Page 44                                     GAO/NSIAD-SO-60 DOD’s Household Goods Carriers
                                                        Appendix III
                                                        Shipping Offices’ Carrier, Rate, and Work
                                                        Load Data




---
                                                                                       Average low       Percentage of      Average number of shipments
                                                                         Average          rate from      carriers’ rates               per day to
                                                                        number of          shif$p~           at low rate                 All Highest volume
Shippinig office                                                          carriers                                  level     destinations        destination
Ohio ’                                                                                                                                                      --
  Naval;Flnance Center, Cleveland                                               84                 100                98                2.9                      0.4
  Wrrght.Patterson Air Force Base                                              160                  74                74                7.7                      I.1
                                ..- --____-___
Oklahoba                                                                      ~---~-.__
      Altus ;Arr Force Base                                                     32                 100                96                1.8                    0.3
      Fort $1                                                                  103         --76-                      89                8.9                    1.1
      McAlester Army Ammunition     Plant, McAlester                            19              100                   95                0.8                    0.i
                                           ----..-~--              __-._         .-~                                                                     I__-
      Trnke Air Force Base                                                      71
                                                                               ___~        ____-
                                                                                                 81                   70                4.1                ___ 0.5
      Vane r Air Force Base                                                     19              100                   90                1.5                      0.2
                                                 ~__-
Penns 3 lvania                                                 ----_____-
  Carlisle Barracks                                                            67                   90                76                5.5                     0.7
  Charles E. Kellev Support Facilitv. Oakdale                                  62                  100                99                4.3
                                           __.--__                -..                                                                                        _--.0.5
      Navai Station, Philadelphia                                             77                    81                63                7.8                     3.0
                                                                         __
      Tobyhanna Army Depot,-Tobyhanna                                         30                   100                96                0.6                     0.1
                                             ___.-
                                                -.----.--.~              -- _____.
Rhode ‘Island                                                                     ---___
      Navai Education and Training Center,    Newport                         86                   69                 57                7.8                      1.2
                                   ~. .-~ .--~~-___.
South Carolina                                                -.._....-.-.---~_                                                                           -.__
      Fort Jackson                                                                80            100                   99                3.9                      0.6
      Marine Corrx Air Station. Beaufdrt                                          40       __-__100                   97                3.2                      0.6
      Mvrtle Beach Air Force Base                                                 31               100                90                1.7                      0.2
      Nava’l Supply Center, Charleston                                                                                                                           2.1
      Shaw Arr Force Base                                                         47               100                99                3.0                      0.3
South Dakota
      Ellsworth Arr Force Base                                                    46               100                94                2.3                      0.3
Tennejsee
      Naval Air Station, Memphis                                                  85     .~~ _- 100 ..---             98                5.2         ~-           1.0
Texas ’                                                                                                                                                 .__
      Ber&trom
         -8      Air Force Base                                                 71                69
                                                                                             ___---                   58                3.6                      0.5
      Cars&ell Air Force Base                                                  113                70                  54                4.9______.___            0.9
      Dvess Air Force Base
       I   ;-
                                                                                41               100                 100                2.3           -____      0.3
      Fort BIISS                                                               119            --- 68                  55                9.6                      0.8
      Fort hood                                                                 92                68                  51               13.1                      1.3
      Goodfellow Air Force Base                                                 45                82                  68                1.9                      0.2
      Joint Personal Property Shipping Office-San
        Antonio                                                                150                  66                46               22.4                   3.1
                                                                                    -~. .-~~-___
      Navdl Air Statron, Corpus Christi                                         64                  65                42                5.6     -             1.4
      Red Rover Army Depot, Texarkana                                           34 ----700                           100                1.5                   0.2
                                                                                   .~ ___~~.
      Reese Arr Force Base Vm                                                   32               100                 100                1.8                   0.3
                                                                                             ..__.-
      Sheppard Air Force Base                                                   41               100                  92                2.2                   0.3
                                                                                                                                                     (continued)




                                                        Page 46                                             GAO/NSIAD-SO-50 DOD’s Household Goods Carriers
                                                    Appendix III
                                                    Shipping OfYices’Carrier, Rate, and Work
                                                    Load Data




                                                                              Average low      percentage of     Average nu:rF; o;oshipment*
                                                               Average           rate from     carriers’ rates              P     Y
                                                              number of           shirgj;~         at low rate                All Highest volume
                                                                carriers                                 level     destinations       destination


                                                  ---___                84             100                 95                4.2              0.7
Virgi ia
     b
  Cqnsolrdated Personal Property Shipping Office-
                                                                        71             100                 98                8.9              0.8
                PersonatProperty   Shipping Office-
                                                                        113             70                 67              22.9               3.1
                                                                         73             96                 89               5.1               0.6


Washington                         --..-.--.-.-_-._.--.-       ____-~
  Fairchild Air Force Base                                             70              100                 98                2.5              0.5
  Joint Personal Property Shipping Office-Fort Lewis                  189               67                 55               15.7              2.5
  Naval Air Station, Whidbey - Island,
                                    --___.
                                        Oak Harbor                     78              100                 98                3.1              1.0
                                               _____-.
 Naval Supply Center, Puget Sound, Bremerton ____..-                  135               69                 65                6.0              1.6
Wyoining                                             ---.-
 F.i. Warren Air Force Base                                             41             100                 97               2.3               0.5
Aveiage                                                                 72              89                 83               4.9               0.7




                                                   Page 46                                      GAO/NSIAD-90-60 DOD’s Household Goods Carriers
            IL
       ’    ~

Appendix IV

Mz$jorContributors to This Report


                               Edward M . Balderson, Assistant Director
Natibnal Security and          J. Kenneth Brubaker, Evaluator-in-Charge
Intehational Affairs           H. Donald Campbell, Evaluator
Div$ion,         Washington,   Martin E. Scire, Evaluator
                           -
D.C.




                     Y




(3933119)                      Page 47                        GAO/NSIAD-90-50 DOD’s Household Goods Carriers
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