State Department: Using Best Practices to Relocate Employees Could Reduce Costs and Improve Service

Published by the Government Accountability Office on 1997-10-17.

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

                  United States General Accounting Office

GAO               Report to Congressional Committees

October 1997
                  STATE DEPARTMENT
                  Using Best Practices to
                  Relocate Employees
                  Could Reduce Costs
                  and Improve Service

                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   National Security and
                   International Affairs Division


                   October 17, 1997

                   Congressional Committees

                   In the past few years, the Department of State has begun to examine the
                   applicability of “best practices” used in both the public and private sector
                   to key agency processes. Because the Department, like many private
                   sector and other government organizations, expends considerable
                   resources each year to relocate employees internationally, we examined
                   its process for transferring employees and their household effects to
                   identify best practices that State should consider adopting to reduce costs
                   and improve services.

                   This report discusses (1) State’s process for transferring employees and
                   their household effects overseas and (2) opportunities for State to apply
                   the best practices that private sector and other government organizations
                   use to complete overseas transfers. We plan to report separately on the
                   processes for providing housing and residential furniture to employees
                   posted overseas. The analysis in this report should be useful to the
                   working groups charged with planning for the reorganization of State, the
                   U.S. Agency for International Development (USAID), the United States
                   Information Agency (USIA), and the Arms Control and Disarmament
                   Agency (ACDA) to the extent that State is to assume responsibility for the
                   international transfer and transportation activities of those agencies.

                   Over 3,000 State employees, along with their household effects, are
Background         transferred to new duty stations each year, of which about 1,000
                   employees are transferred from Washington, D.C., to foreign locations.
                   State’s direct costs associated with the employee transfer process have
                   typically exceeded $60 million annually in recent years. Indirect personnel
                   costs are difficult to quantify due in part to the numerous offices and staff
                   involved in the process. Other U.S. agencies operating overseas also
                   routinely transfer large numbers of employees to foreign locations. For
                   example, USAID and USIA alone transfer a total of approximately 1,000
                   employees annually. Many private sector firms also regularly transfer large
                   numbers of employees overseas.

                   Our comparison of State’s process for transferring employees and their
Results in Brief   household goods overseas to the processes of other public and private
                   sector organizations suggests that State’s procedures are overly

                   Page 1                                        GAO/NSIAD-98-19 State Department

    cumbersome and inefficient. State’s employee transfer process has
    remained essentially unchanged for years and involves at least 12 agency
    bureaus and offices, over 150 support staff, and numerous administrative
    forms. State employees transferring overseas are confronted with a myriad
    of steps and handoffs requiring individual transactions with multiple
    offices. No single office within the Department is held accountable for
    ensuring the timely and successful transfer of employees and their
    families. Similarly, employees’ household shipments are typically
    channeled through a maze of offices and contractors, resulting in
    unnecessary costs.

    The Department of State has an opportunity to significantly streamline its
    employee transfer process, enabling it to provide better services to its
    employees and to reduce costs. Leading U.S. companies and other
    organizations have achieved these benefits by implementing a number of
    “best practices,” such as

•   providing one point of contact for assistance to the employee, a method
    known as “one-stop shopping;”
•   centralizing the administration of transfers under one organizational unit
    and integrating various functions into that unit;
•   developing an integrated information system for tracking and coordinating
•   contracting with one freight forwarder to ship an employee’s household
    effects, rather than using multiple vendors for the various segments of the
    same move; and
•   outsourcing various parts of the transfer process.

    Although we were unable to develop precise cost reduction estimates for
    implementing these best practices, several organizations indicated that
    they were able to achieve substantial cost savings by doing so. In addition,
    our analyses of certain cost data and other information available at State,
    including some of State’s own studies, indicate the potential for achieving
    similar cost reductions for the Department. For these and other reasons,
    we believe that the potential cost reductions could total millions of dollars

    Page 2                                         GAO/NSIAD-98-19 State Department

                      State’s process for transferring employees overseas is inefficient,
State’s Employee      cumbersome, and costly. It requires employees to work with personnel in
Transfer Process Is   at least 12 bureaus and offices and involves over 150 support staff. There is
Inefficient,          no integrated data base containing all of the information needed to track
                      and coordinate the employee’s transfer, so some data are entered into
Cumbersome, and       various systems repeatedly. Initially, an employee transferring abroad
Costly                must contact several officials in the Bureau of Personnel for guidance and
                      information. There are currently 38 counseling and assignments officers,
                      whose responsibilities entail preparing assignment notifications and
                      coordinating training for the employee being transferred. The counseling
                      and assignments officers maintain close liaisons with State’s other
                      Washington bureaus and the overseas posts. In the Assignment Support
                      Division, personnel technicians are assigned to prepare travel orders and
                      personnel actions, provide counseling, and give employees a checklist of
                      17 steps to complete in the transfer process. In addition, officials in the
                      Bureau of Personnel’s Executive Office often work with employees who
                      seek exceptions to departmental policy on matters such as entitlements
                      for shipping household effects. They also provide certain administrative
                      functions, such as adding accounting-related data to the employee’s travel
                      order. Figure 1 illustrates the employee contact points for relocating

                      Page 3                                        GAO/NSIAD-98-19 State Department

Figure 1: Key Stops for State Department Employees Transferring Abroad From Washington, D.C.

                                                                      Counseling and
                                                                    Assignments Officer
                                                                      for assignment
                                                                        and training
                                          Foreign Service                                        Personnel
                                            Lounge for                                         technician for
                                        counseling on the                                  travel authorization
                                         transfer process,                                and counseling on the
                                       and to check out of                                   transfer processa
                                         the Departmentb

                      Travel Service                                                                               Office of Medical
                        Center for                                                                                Services for medical
                     travel advanced                                     Employee                                   clearances and

                                                                                                                              National Foreign
       Payroll office for
                                                                                                                               Affairs Training
        pay advanced
                                                                                                                              Center for training

                     Bureau of                                                                                    American Express
                Diplomatic Security                                                                                   for travel
                    for overseas                                                                                   arrangements
                  security briefing

                                           Employee                                            Division for
                                           discusses                                        counseling, and
                                        transfer details                                   shipment/storage
                                           with post                                         of household

                                                                       Passport and
                                                                       visa officesc

                                                   Bureau of Personnel.
                                                      Bureau of Administration.

                                                  Page 4                                                      GAO/NSIAD-98-19 State Department

    Bureau of Consular Affairs.
    Bureau of Finance and Management Policy.

Source: Department of State.

In the Bureau of Administration, the employee being transferred has to
contact several additional officials for counseling, guidance, and
assistance. The employee is expected to (1) work with a counselor in the
Transportation Division to arrange for the storage and/or shipment of
household effects and (2) contact the Offices of Overseas Schools and
Allowances if questions or related issues arise. The employee may also
visit the Employee Service Center’s Foreign Service Lounge any time
during the process. The Center helps an employee obtain information
concerning the move, provides a checklist of 23 steps to complete, and
helps register the employee’s new location. Other bureaus/offices that an
employee typically deals with include the Bureau of Diplomatic Security
for security briefings, the Bureau of Finance and Management Policy for
pay advances and other payroll issues, the bureau/office/post that is
gaining or losing the employee, the Office of Medical Services, and the
American Express Travel Office. If in training at the Department’s Foreign
Service Institute in Arlington, Virginia, the employee also has the option of
working with transportation and travel representatives assigned to the
mini one-stop processing unit and with a nurse from Medical Services. In
addition, employees often work with personnel specialists in the regional
bureaus to address administrative matters associated with their transfer,
including changes in medical insurance coverage and addresses for
tax/benefits purposes.

State has known for years that its process for transferring employees and
their households overseas was cumbersome and inefficient. State’s most
recent attempt to examine the issue took place in 1994 and 1995 as part of
its agencywide Strategic Management Initiative.1 State recognized that the
transfer process had numerous problems: it took over 100 steps to
complete a transfer, it lacked a single source fully familiar with the system,
and it did not have a comprehensive data base for tracking the entire
process. A working group recommended a complete overhaul of the
transfer system, with a goal of having a simple, one-stop,
customer-oriented program. The group’s recommendations included
(1) establishing customer representatives in State’s Bureau of
Administration to manage the transfer of employees from start

 The Secretary of State established the initiative in 1994 to help set the Department’s future course and
eliminate unnecessary or marginal functions and internal duplication. Its first phase resulted in a series
of 1995 reports analyzing key issues, including reengineering of the Foreign Service’s transfer process.

Page 5                                                          GAO/NSIAD-98-19 State Department

    (assignment notification) to finish (arrival at post and resolution of
    claims), (2) outsourcing certain processes, and (3) creating a new transfer
    data base for all participants in the process.

    According to Bureau of Personnel officials, these recommendations were
    not implemented largely due to State’s (1) focus at that time on improving
    its process for selecting/assigning employees to meet specific overseas
    post requirements and (2) reluctance to make the substantial
    organizational changes necessary for a successful reengineering of the
    process. Although the process remains essentially the same, State’s
    Bureau of Personnel took several steps to improve parts of the system
    under its domain. These included simplifying some of the forms required
    for a transfer, centralizing the location of its personnel technicians,2 and
    combining functions previously handled by separate assignments officers
    and career development officers into one position. The Bureau also began
    developing a new integrated personnel management system. In addition,
    the Department established a “mini” travel and transportation assistance
    unit for employees receiving training at its Foreign Service Institute.

    We interviewed four employees that were in the final stages of transferring
    from Washington, D.C., to an overseas post—the most onerous of all the
    possible transfer situations, according to the Strategic Management
    Initiative working group that examined the transfer process. The
    employees had mixed views concerning the process’ efficiency, but
    frequently described it as cumbersome and time consuming. Specific
    descriptions of some of the problems with the current process included
    the following:

•   Too many people must be contacted to obtain the necessary forms and
    complete all the steps. No one person is available to coordinate the
    various requirements. It is not clear to whom family members
    could/should turn for help in solving relocation problems if the employee
    has already reported overseas or is not physically available to assist them.
•   Progress through the system is seriously hampered if any delays are
    encountered, particularly in the process for obtaining a medical clearance.
    A clearance is required for a travel order, which is a prerequisite for
    finalizing travel, transportation, and other actions.
•   There is no automated tracking system or single data base containing all of
    the information relevant to the employee’s transfer. The main tracking

     Personnel technicians provide counseling, prepare travel orders, and execute other administrative
    actions related to employee transfers.

    Page 6                                                        GAO/NSIAD-98-19 State Department

                         system is the employee’s personal working file, which is a manual set of
                         various forms, checklists, and contacts.

                         Appendix I shows in detail the typical steps and complexities involved in
                         State’s current transfer process.

Transporting Household   The single most costly element of the overall transfer process is
Effects                  transporting employees’ household effects. Of the $62 million in direct
                         costs related to transferring employees in fiscal year 1996, State spent
                         about $36 million, or about 60 percent, on moving household effects.3 The
                         indirect costs associated with the process are also high due to the
                         complexity of the process and the numerous personnel involved. For
                         example, State’s Transportation Division, which oversees shipments of
                         both household effects and official supplies, employs 69 permanent staff
                         and 38 contractor staff at its 6 locations (Washington, D.C.; 4 regional
                         despatch agencies; and the European Logistical Support Office).4

                         The process that State uses for managing the bulk of its household effects
                         shipments is very complicated, entailing multiple steps and handoffs. No
                         single contractor is responsible for the entire move. For most shipments,
                         State contracts separately for each segment of the move, including
                         packing and crating of the household effects at the employee’s residence,
                         trucking to the port, consolidating the effects with other shipments at the
                         port, transporting by ocean or air, separating consolidated shipments at
                         the destination port, trucking to a local contractor for delivery, and
                         unpacking at the destination residence. This multistep approach is known
                         as the “direct procurement method.” This method involves various
                         combinations of State’s Transportation Division in Washington, D.C.; its
                         four regional despatch agencies; and the European Logistical Support
                         Office, to contract for, coordinate, and monitor each move segment. An
                         additional disadvantage associated with the fragmented nature of this
                         method is that it makes it difficult to document the total actual costs and
                         to exercise accountability and control over the process. Figure 2 illustrates
                         the multiple handoffs required for direct procurement shipments.

                          Other key direct cost categories include travel, allowances, and temporary storage of household
                          The despatch agencies are located in Baltimore, Maryland; Miami, Florida; New York, New York; and
                         Seattle, Washington. The European Logistical Support Office is located in Antwerp, Belgium.

                         Page 7                                                        GAO/NSIAD-98-19 State Department

Figure 2: The State Department’s Direct Procurement Process

                                                                                                Support Office


                                 Moving                                           New York
                                Company                                           Despatch

         State Department


                            In some cases, State warehouses
                            household goods temporarily at the
                            despatch agencies and the European                     Seattle
                            Logistical Support Office                             Despatch

                            State contracts separately for each
                            segment of the move

                                                   Source: Department of State.

                                                   State makes very limited use of “door-to-door” channels to contract with a
                                                   single freight forwarder for shipping an employee’s household effects—a
                                                   practice used throughout the private sector and seen as more
                                                   cost-effective than using multiple vendors for the various segments of the
                                                   same move. For example, in 1996, State used the door-to-door program for
                                                   only about 16 percent of the 1,065 shipments from the United States to 38
                                                   overseas locations where use of the door-to-door program was feasible.

                                                   Page 8                                       GAO/NSIAD-98-19 State Department

                        Many private sector companies have recently reengineered their processes
Application of Best     for international relocation to control the growing costs associated with
Practices by State      their international operations and to provide better service to their
Could Significantly     employees. If State applied industry best practices to its process for
                        transferring people, it could improve the quality of services to its
Improve Its             employees and their families, reduce the time required for employees to
Operations              complete the process, and possibly lower costs by reducing the number of
                        staff and other resources required to administer the program.

                        A 1995 study by a private consulting firm examined the overseas
                        management policies of 30 corporations and identified several “best
                        practices” that we believe should be considered for application to State’s
                        transfer process. These include (1) centralizing program administration
                        under the responsibility of one unit to have more specialized staff
                        dedicated to the function; (2) providing one-stop shopping to improve
                        employee satisfaction and accountability; (3) developing integrated
                        information systems to eliminate outdated and duplicate systems, track
                        costs, identify the status of key events, and reduce management burdens;
                        and (4) outsourcing. The companies surveyed ranged from small to large,
                        indicating that best practices are applicable regardless of the size of the
                        overseas population.

                        During our benchmarking exercise, we visited a number of companies that
                        demonstrated how one or more of these best practices has been applied to
                        improve the quality of services provided to their employees and/or to
                        reduce costs. In addition, all of the companies that we visited used the
                        door-to-door method of shipping household effects.

Ford Motor Company’s    Ford currently supports a population of about 2,150 international service
International Service   employees in nearly 50 countries. In 1996, about 400 employees were
Center                  transferred from the United States to foreign locations, and about 400
                        were repatriated to the United States. In April 1996, the company began a
                        major reengineering of its international service employee relocation and
                        management function. The key feature of the reengineered process is
                        Ford’s new International Service Center, which completely centralized the
                        company’s process for transferring, managing, and returning international
                        service employees. Before establishing the center, Ford’s management of
                        the process was spread across divisional lines and, according to Ford
                        officials, “it simply did not work very well.” Ford officials believe that the
                        center has (1) significantly improved the quality of services provided to its

                        Page 9                                         GAO/NSIAD-98-19 State Department

                                  international service employees and (2) enabled the company to better
                                  support its substantial investments in overseas operations.

                                  Critical to the operations of the International Service Center are the 17
                                  international service associates (counselors) who are organized on a
                                  geographical basis. The associates are responsible for coordinating and
                                  ensuring that all aspects of an employee’s international transfer are
                                  completed successfully, including the move out to post, the coordination
                                  of activities during the assignment, and the repatriation of the employee.
                                  An employee being transferred is assigned to one counselor as his/her
                                  focal point for the entire duration of the international assignment. At any
                                  one time, each counselor is responsible for supporting about 130
                                  international assignees. Ford also relies heavily on private vendors to
                                  execute key components of the process, including Orientation Services for
                                  policy briefings and cross-cultural presentations; American Express for
                                  travel, passports, and business visas; Coopers and Lybrand (an accounting
                                  firm) for tax issues; John Hancock Company for health care orientations
                                  and insurance inquiries; and Palmer Moving and Storage for moving and
                                  transportation of household effects. Each of these vendors is located in
                                  the International Service Center. The only part of the international transfer
                                  process that is managed outside the center is the employee’s medical
                                  clearance. Figure 3 shows the major parts of Ford’s process for
                                  transferring an employee overseas.

Figure 3: Key Stops for Ford
Employees Transferring Overseas
                                                          Employee visits
                                                        Ford medical office
                                                         for medical exam
                                                           and clearance

                                     Employee                                                                      Employee
                                                            assisted by
                                    selected for                                                                 arrives at new
                                    assignment                                (International service associate    destination
                                                          Service Center
                                                                              coordinates all aspects of the
                                                                              transfer for the employee)

                                  Source: U.S. GAO.

Other Potential Corporate         Texaco also clearly demonstrates the benefits of centralizing the
Models                            management of international transfers. Texaco currently supports about

                                  Page 10                                              GAO/NSIAD-98-19 State Department

550 international assignment employees worldwide, and the number of its
transfers to and from the United States to foreign locations totaled about
230 in 1996. The majority of Texaco’s employees transferred are
professional mid-level positions, and the typical overseas assignment is for
3 years. Texaco reengineered both its domestic and international
relocation processes beginning in 1994. Texaco’s reengineering, which
included benchmarking with nine companies, identified several corporate
best practices in expatriate management. These included providing
centralized management, having geographic expertise among staff, using
state-of-the-art technology to support administration, and outsourcing
various services. Texaco’s reengineering resulted in a centralization of its
expatriate management activities into two key offices:

(1) In 1994, the company made a significant change in its operations by
outsourcing for the transportation of household effects and related
services and centralizing these services in the Texaco Relocation Center.
Initially, the vendor only handled domestic transfers but soon took over
international services. The vendor’s three counselors and two associates
had primary responsibility for 674 moves in 1996. Texaco officials said that
the quality of the services provided to its employees has substantially
improved and costs have been reduced by relying entirely on the vendor
for this component of the process. Cost savings were attributed to
reductions in corporate overhead and to the ability of the vendor to
negotiate lower rates for moving household effects.

(2) In 1995, many of the various internal expatriate support processes that
had been decentralized in the corporation’s three international divisions
were centralized in the Expatriate Service Center. The center, which
coordinates payroll, allowances, medical, visa, and related services for
persons transferred to and from foreign locations, is staffed with 12
corporate personnel (5 counselors, 2 tax specialists, 2 compensation
specialists, 2 secretaries, and 1 center manager). The counselors are
organized on a geographic basis, and they track/assist the employees for
the entire length of their overseas assignment, including repatriation. A
computerized information system was purchased from a consulting firm
and adapted to coordinate these various functions. The system is
integrated with Texaco’s main payroll systems and contains several
important data elements, including a checklist for key parts of the transfer
process and information on employees’ assignments, addresses,
emergency contacts, visas, and compensation.

Page 11                                       GAO/NSIAD-98-19 State Department

                               According to Texaco officials, the benefits of centralizing services in the
                               center have included the following:

                           •   Communication with employees and their families has improved.
                           •   Employee downtime has been minimized throughout the process.
                           •   Problems and complaints have diminished.
                           •   Service has been cost-effective.
                           •   Administrative support has focused on value-added work.

                               Another company that we visited and that asked for anonymity has for
                               years had one point of contact for its employees assigned internationally.
                               This company, which has an international employee assignment work
                               force of about 2,200, transferred about 400 employees to and from the
                               United States in 1996. Historically, most of its international transfers have
                               been in professional and mid- to upper-level management positions. The
                               typical period of assignment overseas has been for 3 years. This company
                               relies on a centralized international assignments unit to manage the
                               transfer of employees. Key to the process are regional counselors in the
                               unit, who provide one focal point for the employee for coordinating all
                               aspects of the transfer. These include a one-on-one discussion of
                               corporate relocation policy, referral to a moving company, and
                               arrangements for a homefinding visit to the next post. To facilitate the
                               process, the unit also purchased an off-the-shelf software system to handle
                               the process’ information requirements. According to company officials,
                               this eliminated older obsolete systems, reduced costs and time
                               requirements for administering the program, and created better interface
                               with other corporate systems. Similar to Texaco, the use of enhanced
                               information systems also improved the company’s budgeting,
                               accountability, and control over the relocation process.

                               Appendix II compares State’s practices to some of the best practices we

Adopting One-Stop              If State implemented one-stop shopping (one focal point for the employee)
Shopping and Centralized       and centralized program administration, it could achieve benefits such as
Program Administration         improved quality of services for employees and their families, reduced
                               time required for employees to complete the process, and possibly lower
                               costs resulting from fewer staff required to administer the program. If
                               State were to develop an integrated information system to support the
                               transfer process, it could significantly enhance counselors’ support

                               Page 12                                        GAO/NSIAD-98-19 State Department

capabilities and possibly enable them to efficiently handle a greater
number of transfers.

State officials in the Bureau of Personnel were very supportive of the
one-stop shopping concept and an integrated information management
system to support the process. Officials in State’s Bureau of
Administration endorsed the development of an integrated system for
tracking and coordinating the transfer process. They also endorsed
one-stop shopping wherever possible, although they expressed some
concern about whether one coordinator/counselor should be given
complete responsibility for both the transfer of the employee and the
shipment of his/her household effects. They believed that (1) certain
functions such as counseling, travel, passport, and visa requirements,
could clearly be consolidated into one customer service office and
(2) customer service coordinators could help coordinate other transfer
activities with designated transportation specialists and medical, security,
and assignments officers.

Based on the best practices we identified in the private sector and the
views of State officials, figure 4 shows a one-stop shopping process that
we believe State could effectively adopt.

Page 13                                       GAO/NSIAD-98-19 State Department

Figure 4: Potential Model for One-Stop
Shopping at State
                                             Employee         Employee goes to                        Employee
                                            assigned to       State's Overseas                        arrives at
                                           overseas post       Transfer Center                           post

                                                             Transfer coordinator

                                                                              Coordinates panel assignment decisions,
                                                                              training requirements, and reporting dates

                                                                               Updates employee locator, emergency,
                                                                               residence, and dependency information

                                                                                Schedules medical clearances ( if not
                                                                                 already updated) and inoculations

                                                                                 Counsels employee regarding travel
                                                                                        and shipment needs

                                                                                        Initiates travel authorization

                                                                             Helps employee make travel arrangements
                                                                                        through contractor

                                                                               Arranges for shipment and storage of
                                                                              household belongings with Transportation

                                                                                     Assists employee in applying for
                                                                                           passports and visas

                                                                                    Arranges consultations required for
                                                                                           specific assignments

                                                                             Arranges for overseas security briefing from
                                                                                   Bureau of Diplomatic Security

                                                                                 Assists employee in applying for pay
                                                                                          and travel advances

                                                                                    Checks employee out of Department

                                         Source: U.S. GAO.

                                         Page 14                                            GAO/NSIAD-98-19 State Department

Expanding Door-to-Door   If State applied industry practices to its process for transporting employee
Shipments                household effects, it could further streamline the transfer process, reduce
                         overhead, and exercise better accountability and control. The direct
                         procurement method that State currently uses for transporting most of its
                         shipments was designed at a time when State was one of a few
                         organizations operating on a worldwide basis. Now that numerous private
                         and public organizations operate globally, a broad range of companies to
                         transport household effects internationally is available. Private industry,
                         many foreign governments, and other organizations generally use some
                         form of the less complicated and usually cheaper door-to-door approach
                         for shipping overseas, including transportation to developing countries.
                         None of the companies or governments that we visited used processes
                         similar to the one State uses for direct procurement shipments.

                         Unlike the multistep direct procurement approach, the door-to-door
                         method entails contracting with one commercial forwarder for all
                         transportation and related services required to move an employee’s
                         household effects from their origin to their final destination. The
                         forwarder acts as a broker, arranging and paying for each of the move
                         segments. The General Services Administration makes available to U.S.
                         executive branch civilian agencies international household goods tender
                         (offers) of service agreements for door-to-door shipments to and from
                         certain overseas locations. Figure 5 depicts the limited number of handoffs
                         that are required for door-to-door shipments. It is important to note that
                         many of the same activities that occur using the direct procurement
                         method are included in the door-to-door approach—the difference being
                         that when using door-to-door, the commercial forwarder, rather than the
                         State Department, is responsible for all steps.

                         Page 15                                       GAO/NSIAD-98-19 State Department

Figure 5: The Door-to-Door Shipment Process

            State Department                                   Freight                                           New Home

                                                        •   Packing/crating
                                                        •   Trucking
                                                        •   Ocean/Air Transport
                                                        •   Receiving
                                                        •   Delivery/Unpacking

                                        Source: Department of State.

                                        We believe that State could also reduce the costs of shipping household
                                        effects overseas by expanding its use of the door-to-door approach.
                                        Because of the fragmented nature of State’s current transportation process
                                        and deficiencies in State’s financial management system, we were not able
                                        to document the direct cost reductions that State could achieve by
                                        expanding its door-to-door program. However, in recent years, a number
                                        of State Department Office of Inspector General reviews found that,
                                        although using the direct procurement method could have lower costs in
                                        some instances, the door-to-door method is usually less expensive and
                                        could result in “significant” savings over time.5

                                        Our work further shows that even if the direct costs associated with direct
                                        procurement and door-to-door shipments are essentially the same, the
                                        overall costs of using the direct procurement method are higher because
                                        of substantially greater personnel and other indirect costs associated with
                                        this system. Because of the multiple handoffs involving the Transportation
                                        Division, the various despatch agencies, and the European Logistical

                                         In 1992, the Inspector General first recommended that State use the door-to-door method. State
                                        agreed to implement a program on a test basis beginning in 1992. In 1993, another Inspector General
                                        review established that the door-to-door method was less costly and recommended that State expand
                                        its use to include, wherever feasible, shipments from overseas posts back to the United States and
                                        shipments from post to post. A follow-up review in 1995 found that State’s use of the door-to-door
                                        method for 225 shipments between December 1992 and March 1994 to both developed and developing
                                        countries had resulted in $376,687 in direct cost savings, or an average shipment savings of $1,674.

                                        Page 16                                                      GAO/NSIAD-98-19 State Department

Support Office, these costs range from about $600 to about $1,600 per
shipment, based on estimates developed by State’s Logistics
Reengineering Project team.6 In contrast, the indirect costs for
transportation management salaries, facilities expenses, and other charges
associated with the much simpler door-to-door method are only about
$400 per shipment and could be even lower if State were to expand its use.

In addition, as State further reengineers its process for obtaining goods
and services, the costs associated with direct procurement shipments are
likely to rise even higher. State’s logistics reengineering program involves,
among other initiatives, expanded use of local purchase and
direct-from-vendor delivery for supplies and equipment needed at
overseas posts. These changes mean that fewer supplies and other items
will flow through State’s transportation infrastructure and there will be
fewer opportunities to consolidate such shipments with household
effects—one of the primary benefits of the direct procurement approach.
Reduced consolidation equates to higher direct costs, but the increases do
not end there. As State comes to rely less on its own Transportation
Division resources such as the despatch agencies for moving supplies and
other items overseas, the per shipment indirect costs associated with the
direct procurement approach will increase accordingly.

Although the cost considerations are considerable, State has not
significantly expanded its use of the door-to-door program since
implementing it on a test basis in 1992. In 1996, State used the
door-to-door program for only about 16 percent of the 1,094 shipments to
locations where use of the door-to-door program was feasible and in only
2 percent of the shipments back to the United States. According to State
transportation officials, reasons for not expanding the program further
have included (1) concerns that door-to-door opportunities may be
limited, particularly in remote locations around the world; (2) lack of
Transportation Division authority over posts’ choice of shipping methods;
and (3) apprehension about possible opposition from the U.S. moving
industry because of concerns about some firms losing business as a result
of changes in State’s practices.

A recent increase in the number of overseas locations for which the
General Services Administration offers international tenders of service
could facilitate the expansion of State’s door-to-door program. Until
recently, the General Services Administration had made such agreements

 This team, comprised of civil and Foreign Service logistics managers in the Department, recently
completed the design for an entirely new “reengineered” process for obtaining the goods and services
needed to support State’s worldwide mission.

Page 17                                                      GAO/NSIAD-98-19 State Department

available for shipments from the United States to 40 overseas locations. It
had also offered the tenders for shipments from these same 40 locations
back to the United States. In May 1997, the General Services
Administration increased the number of door-to-door routes to more than
150 cities worldwide. We believe that the expanded use of these routes by
State for its shipments from the United States will encourage the overseas
posts to adopt similar cost-saving practices. While changes in State’s
practices might affect the U.S. moving industry, the potential benefits to
the government are significant.

Expanding its door-to-door program would also enable State to consider
limiting the number of freight forwarders used for shipping household
effects, thereby maximizing its leverage with individual companies by
offering a greater volume of business for specific vendors. Most of the
private sector companies we visited, the World Bank, and the U.S.
Customs Service used this strategy, limiting to between one and three the
number of freight forwarders used for international household effects
shipments. In addition, we found that the British government contracts
with only one freight forwarder to ship diplomatic effects worldwide, and
the Canadian government relies on two freight forwarders. New Zealand
also uses a global contract with one freight forwarder and, according to a
1996 Australian Department of Foreign Affairs and Trade report on
options for streamlining its process for moving international household
effects, both Canada and New Zealand have reduced costs by using this
approach. The Director of the office responsible for relocations at
Customs said that limiting the number of freight forwarders has enabled
him to hold the vendors to a much higher standard of performance. Also,
Ford officials said that limiting the number of freight forwarders has
reduced costs and improved controls over shipments.

We believe that State could expand the use of the door-to-door method on
a route-specific basis, taking overall costs, accountability and control, and
quality of service into consideration. Overall cost comparisons would need
to consider both direct and indirect costs, including personnel and other
indirect costs in the Transportation Division, the regional despatch
agencies, and the European Logistical Support Office. Since State’s
Logistics Reengineering Project team has already developed much of the
necessary data on indirect costs, it would be a logical choice for making
such comparisons. Also, since the continued implementation of the
Logistics Reengineering Project has an impact on the indirect costs
associated with household effects shipments, the team would be well
positioned to factor such variables into the analysis.

Page 18                                       GAO/NSIAD-98-19 State Department

Outsourcing Options   Another best practice that may have application in certain areas of State’s
                      transfer process is outsourcing. The private consulting firm that recently
                      surveyed the expatriate management practices of 30 companies identified
                      outsourcing as a “best practice.” The study noted that (1) some functions
                      are better candidates than others for outsourcing and (2) decisions
                      concerning outsourcing need not only to weigh its cost-effectiveness but
                      also to consider other factors such as the level of service available, the
                      extent certain skills can only be provided in-house, and the amount of
                      internal control required. During our benchmarking exercise, we also
                      found that private firms typically outsource parts of the transfer process.
                      For example, one company used vendors for compensation functions,
                      overseas destination services, tax services, immigration services, and
                      shipping. That company also examined the possibility of outsourcing its
                      entire relocation function but decided against it because of cost
                      considerations and uncertainty that the relocation service provider could
                      perform as well as the company’s own employees. Another company had
                      completely outsourced its domestic/international transportation function,
                      saving substantial sums based on reduced shipping/moving rates and
                      lower corporate staff requirements.

                      Historically, various State studies have also recognized outsourcing as an
                      option but little action has materialized. For example, in 1995 the Strategic
                      Management Initiative special study group reviewing the transfer process
                      recommended that the Department establish customer service
                      representatives using private contractors for the bulk of the work.
                      However, the study did not examine the cost-effectiveness of the option.
                      The Department did not endorse the group’s recommendation. Another
                      team examined operations of State’s medical office, which is a key step in
                      the transfer process.7 That team concluded that as much as $1.5 million
                      could be saved in annual salary costs by outsourcing the Department’s
                      medical examination program with a private health contractor. The
                      Secretary of State at that time subsequently endorsed the use of private
                      firms or other agencies to handle such services, if justified by rigorous
                      cost analysis.

                      In response to the Secretary’s endorsement, the Office of Medical Services
                      assembled a working group in 1996 to study the issue further. The group
                      developed information that showed that (1) over 4,700 medical
                      examinations were conducted in the Department in fiscal year 1994,
                      (2) the average cost of an examination was $890 in the same year, and

                       To get a medical clearance, employees typically visit State’s medical office twice for initial tests and
                      followup. Additional tests in the unit or externally may be required. Overall, it may take 3-5 weeks to
                      complete the process.

                      Page 19                                                          GAO/NSIAD-98-19 State Department

                  (3) costs became higher in subsequent years because the clinic was moved
                  to larger and more expensive space. Moreover, the analyses noted that the
                  Department’s average examination cost of $890 was substantially higher
                  than the rate of $450 per examination that State had negotiated with
                  George Washington University in Washington, D.C. Although this analyses
                  stated it was clear that medical exams could be obtained at a lower cost
                  elsewhere, no action was taken on the working group’s study.

                  Outsourcing all or portions of the transportation process for household
                  effects also offers potential benefits. An obvious advantage of outsourcing
                  is that it offers a “surge capability” during peak moving periods—in State’s
                  case, during the summer months—without having to devote unneeded
                  resources to the transportation function during nonpeak periods. Some
                  private companies operating internationally expect the contractors that
                  are providing the door-to-door transportation services also to provide
                  other services such as relocation policy counseling—a function that State
                  currently performs in-house using a combination of more than 20
                  permanent employees and contractor staff. Depending on the volume
                  involved, some of these contractors locate their counselors on-site. The
                  World Bank ships the household effects of its approximately 1,000
                  employees who relocate each year using an in-house transportation staff
                  comprised of only 2 permanent Bank employees. The three moving
                  companies that the Bank uses for international relocations have
                  counselors located on-site at the Bank. Contracts have been competitively
                  bid to get the best value.

                  We also found during our review that move management companies
                  provide an even wider range of services than do traditional moving
                  companies, such as claims management, voucher processing, destination
                  services, and accounting services. In one case, the relocation company
                  provided the extra services at no additional charge. In some cases, the
                  companies charged a per shipment fee. These fees should be factored into
                  cost comparisons involving various outsourcing options, along with any
                  related overhead savings.

Lump Sum Option   Another option that some companies employ to streamline the transfer
                  process is to provide lump sum advances to employees to cover specific
                  categories or all of an employee’s relocation expenses. The advantage of
                  this approach is that it eliminates the requirement for employees to
                  itemize or document expenses and thus reduces overhead associated with
                  processing vouchers and other monitoring and compliance activities. An

                  Page 20                                       GAO/NSIAD-98-19 State Department

                            interagency working group addressing travel reengineering as part of the
                            Joint Financial Management Improvement Program recommended that
                            federal agencies have the option of using such an approach to provide
                            subsistence assistance for temporary quarters associated with relocations.
                            State is currently exploring a variation of this option. The Strategic
                            Management Initiative working group that examined State’s transfer
                            system mentioned the “radical” alternative of providing a lump sum for an
                            employee’s entire relocation, where the employee would then arrange for
                            moving his/her household effects and family members. Although the
                            working group said that this method would involve “significant FTE
                            (full-time equivalent) and dollar savings,” it also recognized that it would
                            work well for relocations only to some of the countries where State

Potential Cost Reductions   Applying best practices to State’s transfer process could result in
                            significant cost reductions. The total that could be achieved is dependent
                            on a number of factors, including (1) the personnel and other resources
                            State chooses to redeploy as they are freed up in connection with a more
                            streamlined transfer process; (2) the number of routes where the
                            door-to-door method of shipping household effects is found to provide the
                            best combination of overall cost-effectiveness, accountability and control,
                            and quality of service; (3) the extent to which changes resulting from
                            State’s Logistics Reengineering Project affect household effect shipment
                            costs; and (4) the parts of the transfer process State decides to outsource.

                            Although these and other variables preclude making precise projections,
                            we believe that the potential cost reductions could total millions of dollars
                            annually, based on (1) our limited analysis of the indirect costs associated
                            with certain portions of State’s current process, (2) documented direct
                            cost savings resulting from use of the door-to-door method on a pilot
                            basis, (3) the experiences of companies and organizations that we visited
                            as part of our benchmarking exercise, and (4) State’s own studies. One
                            organization with which we benchmarked saved millions of dollars by
                            applying best practices to its transfer process—an operation smaller in
                            scope than State’s. Also, as noted earlier, State’s own analysis indicated
                            that as much as $1.5 million could be saved by outsourcing one element of
                            the transfer process alone.

                            A successful reengineering of State’s transfer process based on adoption
Potential Benefits for      of best practices and other options could also have significant benefits for
Other Agencies

                            Page 21                                        GAO/NSIAD-98-19 State Department

              other foreign affairs agencies. For example, the Strategic Management
              Initiative study group that examined State’s transfer process in 1994 noted
              that both USAID and USIA had transfer processes that were similar to State’s.

              Our more recent work at USAID as part of this review indicates that USAID’s
              transfer system continues to be complex and cumbersome. A significantly
              improved State process could serve as a model for agencies such as USAID.
              On the other hand, an even more significant challenge and opportunity for
              improvement will be afforded State based on current plans to consolidate
              the operations of the Department and other foreign affairs agencies.
              Specifically, the executive branch is developing plans to (1) consolidate
              the operations of USIA and ACDA into the State Department and (2) integrate
              certain administrative functions of USAID and State. When that occurs, a
              streamlined transfer process could produce much greater benefits.
              However, several issues will have to be addressed, including whether
              (1) staff resources in each agency can/should be consolidated to support
              one transfer process, (2) outsourcing would help manage a significantly
              larger volume of transfer activity, and (3) any of the agencies’ in-place or
              planned information systems can effectively meet process requirements.
              Officials in State’s Bureau of Administration also noted that State, USIA,
              and USAID have very similar transportation systems and integrating them
              would be relatively painless. We believe that this possibility provides
              substantial opportunities for even greater cost savings through a
              consolidation of transportation functions and the broader application of
              door-to-door shipments.

              In today’s budget environment, State can no longer afford to operate
Conclusions   costly and outdated systems. State’s complicated approach to transferring
              its employees—developed when the agency was one of the few
              organizations supporting worldwide operations—remains an
              unnecessarily complicated maze of costly handoffs and mini-operations
              without a lead person in charge or accountable for the entire process. Now
              that many organizations have global operations based on reengineered and
              modern processes, State has an opportunity to rethink its transfer process.
              Several corporations have made significant changes in the way they do
              business in order to remain competitive and to control the costs
              associated with their international operations. By applying best practices
              to their employee transfer processes, firms have reaped several benefits
              including cost reductions, better accountability and control, consistent
              application of corporate policy across division lines, and improved
              services to their employees. Implementing best practices as a fundamental

              Page 22                                       GAO/NSIAD-98-19 State Department

                         part of modernizing its transfer operations would enable State to do the
                         same. A modernized State transfer process would also enable State to
                         more efficiently integrate the operations of other foreign affairs agencies
                         and serve as a model to non-foreign-affairs agencies supporting significant
                         numbers of employees overseas.

                         We recommend that the Secretary of State establish a special team under
Recommendations          the direction of the Under Secretary for Management to design an
                         implementation strategy for improving management of the Department’s
                         employee transfer process. The strategy should take into account the
                         transfer activities of ACDA, USAID, and USIA. The team should be composed
                         of staff from each of the key bureaus and offices currently involved in the
                         process. Its mandate should include the following:

                     •   Identify the most appropriate organizational structure, location, and
                         staffing arrangements for centralizing management of the transfer
                         function, ensuring accountability and control over the entire process, and
                         providing one-stop shopping for the employee.
                     •   Develop an integrated information management system to handle the
                         reengineered transfer process, based on off-the-shelf technologies or
                         information resource management initiatives already under way in the
                         Department, if possible.
                     •   Develop a plan for outsourcing those parts of the transfer process where
                         analyses show that outsourcing would provide better, more cost-effective
                         service than performing the function in-house. Key parts of the process
                         that should be examined include medical and move management services.
                     •   Develop cost, time, and quality performance measures for managing the
                         process and measuring the impact of reengineering efforts.

                         We also recommend that the Secretary of State direct the Transportation
                         Division to substantially expand the use of door-to-door shipments of
                         household effects.

                         In commenting on a draft of this report, State acknowledged that its
Agency Comments          transfer process needs improvement, that “one-stop shopping” should be
and Our Evaluation       the touchstone for such improvement, and that the use of door-to-door
                         shipments should be expanded. However, it did not agree to implement
                         any of our recommendations. State gave several reasons for not taking
                         action, including its (1) limited capacity to take on the issue given the
                         magnitude of agency consolidation, logistics and medical services

                         Page 23                                       GAO/NSIAD-98-19 State Department

reengineering, and information technology efforts already underway;
(2) concerns that the Department’s transfer requirements are different
from those of the private sector; (3) questions about whether Ford Motor
Company would be a good model; and (4) efforts to significantly expand
the number of door-to-door shipments since 1994.

We do not believe that State’s reasons for delaying action or for not
supporting our recommendations are persuasive. In our view,
reengineering the transfer process would improve services, reduce costs,
and represent a logical extension of the Department’s ongoing efforts to
reengineer its logistics system. Additionally, it is important that State’s
reengineering studies consider whether outsourcing is the best way to
provide certain services.

We also do not share State’s concerns that the best practices of the private
sector may not be applicable because of differing requirements. Employee
transfer requirements are much the same in the public and private sector,
essentially focusing on ensuring that employees and their families are
successfully transferred to their new overseas assignments. State’s
concerns are also inconsistent with the reengineering methodology
generally used in government and the private sector and adopted by its
own logistics reengineering team, which relied heavily on the best
practices of the private sector. State’s questions about whether Ford
Motor Company would be a good model appear to be based on the
Department’s misinterpretation of information in our draft report. State
believed that our draft report had implied that Ford’s international
relocation program costs hundreds of millions of dollars annually. That is
not the case—in fact, Ford officials believe that the company’s new
International Service Center, which has adopted one-stop shopping,
outsourcing, and other industry best practices, has significantly improved
the quality of services to its employees and enabled the company to more
efficiently support its entire investment in overseas operations.

State claimed that it had significantly increased its use of door-to-door
shipments. A closer examination of State’s shipping data indicates that the
Department has misinterpreted its own data. Despite its claims of
significantly greater use of door-to-door shipments, only about 10 percent
of the shipments in 1996 that were eligible for the door-to-door method
were actually channeled by the Department through that process.

In summary, we continue to urge State to act on our recommendations.

Page 24                                       GAO/NSIAD-98-19 State Department

                State’s detailed comments, along with our analyses, are included in their
                entirety in appendix III.

                Because the Department of State has not indicated support for our
Matter for      recommendations intended to improve the quality and efficiency of its
Congressional   transfer and shipping process, Congress may wish to direct State to
Consideration   implement them.

                Recognizing that pressure exists to reduce the budget for conducting
Scope and       foreign affairs activities, we undertook to identify potential cost savings
Methodology     for the Department of State. To review and map State’s current process for
                transferring employees, we obtained prior studies, including the
                Department’s 1995 Strategic Management Initiative reports and 1991-95
                audits by its Inspector General. We also interviewed appropriate officials
                at State’s headquarters in Washington, D.C. We developed flow charts of
                generic transfer and shipping processes and developed related cost data to
                the extent practical.

                To identify best practices in the private sector and other organizations, we
                researched literature and consulted with various experts in the area. The
                Employee Relocation Council—a professional association of several
                thousand corporations, government agencies, and other organizations
                concerned with relocation issues—helped us pinpoint several companies
                that had a large number of overseas employees and that were considered
                leaders in the international relocation field and/or had recently
                reengineered their international employee relocation processes.

                To compare best practices in the private sector and State transfer
                processes, we visited six companies identified during our review to
                develop detailed information on these processes and their reengineering
                efforts. We selected these companies based on the number of employees
                transferred, typical time frames for an overseas assignment, and actions
                taken to control costs of international operations. One of the companies
                we visited was also a participant in a study of best practices in expatriate
                personnel management in 30 private corporations, conducted by a private
                consulting company in 1995. We also visited the embassies of the United
                Kingdom and Canada in Washington, D.C., and met with representatives of
                the Australian National Audit Office to obtain an understanding of how
                other national governments transfer their employees to overseas locations.
                In addition, we developed information on USAID’s and the World Bank’s
                transfer processes. We did not independently verify any cost savings or

                Page 25                                       GAO/NSIAD-98-19 State Department

performance benefits data provided by the companies and other
organizations we visited or those identified in other studies.

We conducted our review from August 1996 to July 1997 in accordance
with generally accepted government auditing standards. We performed our
work at government, public, and private organizations in Washington,
D.C.; New York; New Jersey; and Michigan.

We are sending copies of this report to the Administrator, USAID; the
Director, USIA; the Director, Office of Management and Budget; and
interested congressional committees. We will also make copies available
to others upon request.

Please contact me at (202) 512- 4128 if you or any of your staff have any
questions concerning this report. The major contributors to this report are
listed in appendix IV.

Benjamin F. Nelson, Director
International Relations and Trade Issues

Page 26                                      GAO/NSIAD-98-19 State Department

List of Congressional Committees

The Honorable Jesse A. Helms
The Honorable Joseph R. Biden Jr.
Ranking Minority Member
Committee on Foreign Relations
United States Senate

The Honorable Judd Gregg
The Honorable Robert C. Byrd
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
  The Judiciary and Related Agencies
Committee on Appropriations
United States Senate

The Honorable Benjamin A. Gilman
The Honorable Lee H. Hamilton
Ranking Minority Member
Committee on International Relations
House of Representatives

The Honorable Harold Rogers
The Honorable Alan B. Mollohan
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
  The Judiciary and Related Agencies
Committee on Appropriations
House of Representatives

Page 27                                     GAO/NSIAD-98-19 State Department

Letter                                                                                           1

Appendix I                                                                                      30

The Department of
State’s Employee
Relocation Process
(Washington to Post
Appendix II                                                                                     33

Differences Between
the State Department
and Some
Employing Best
Practices for
Appendix III                                                                                    34

Comments From the
Department of State
Appendix IV                                                                                     40

Major Contributors to
This Report
Figures                 Figure 1: Key Stops for State Department Employees Transferring          4
                          Abroad From Washington, D.C.
                        Figure 2: The State Department’s Direct Procurement Process              8
                        Figure 3: Key Stops for Ford Employees Transferring Overseas            10
                        Figure 4: Potential Model for One-stop Shopping at State                14
                        Figure 5: The Door-to-Door Shipment Process                             16

                        Page 28                                    GAO/NSIAD-98-19 State Department


ACDA       Arms Control and Disarmament Agency
USAID      U.S. Agency for International Development
USIA       United States Information Agency

Page 29                                    GAO/NSIAD-98-19 State Department
Appendix I

The Department of State’s Employee
Relocation Process (Washington to Post

                                                           Employee assigned to
                                                              overseas post

                                                                                               CAO generates request for
                                                              Counseling and                     training and transmits
                                                         Assignments Officer (CAO)                   electronically to
                     Employee registers with             determines training needs              National Foreign Affairs         Employee sends notification
                Foreign Service Lounge, updates                                                      Training Center             of assignment letter to post
               locator and emergency information,
                     and receives counseling
                      on the transfer process
                                                              CAO prepares
                                                         assignment notification
                                                         message for employee,
                                                      gaining post, and losing office

                                                       Employee, gaining post, and
                                                         losing office agree on                 CAO requests any training
                                                      reporting and departing dates              agreed to by all parties

                                                                                                                                      Employee receives
                                                                                                                                    assistance from bureau
                                                                                                                                   personnel specialists on
                                                       Personnel technician counsels                                               administrative questions
                                                           employee, as needed,                                                      (e.g., health benefits)
                                                          re: medical clearances,
                                                     transportation, travel, letters, etc.

                 Employee develops travel                                                    Employee gets required medical
             itinerary with American Express                                                   clearance for self and family
                     for self and family

                                                      Personnel technician creates
                                                      travel authorization document             Employee and family get
               Employee forwards copy of                                                         inoculations any time
             prepared itinerary to personnel                                                         before leaving
              technician, who sends arrival
                      notice to post                        Personnel's Executive
                                                         Office adds fiscal data and              Personnel technician
                                                                 transmits travel               sends travel authorization
                                                          authorization to post and                   to employee
                                                         all interested units by cable

                           A      A                  A                A                                             A                                           A

     Optional steps, which can be done in any order.

                                                    Page 30                                                             GAO/NSIAD-98-19 State Department
                                           Appendix I
                                           The Department of State’s Employee
                                           Relocation Process (Washington to Post

               A     A                 A               A         Employee requests passport         A                                                A
                                                                  services request form and
                                                                      photo memo from
                                                                    personnel technician

        Employee picks up     Employee arranges to                               Employee (and spouse and                Employee checks with
          tickets from        have household goods                                dependents, if desired)                 allowances office to
        American Express         shipped to post                                  attends security seminar                  verify allowances

                                                                                                                      Employee picks up and turns
                                                                                                                    in application for advance of pay
                                                                                                                      to payroll office in Bureau of
                                                                                                                    Finance and Management Policy

                                                      Employee takes memo to
                                                     photo clerk in passport office                                     Employee can get travel
                                                           and gets photos                                                 advance through
                                                                                                                         Travel Service Center

                                                                                                                       Employee visits overseas
                                                                                                                     briefing center at the National
                                                       Employee takes photos                                         Foreign Affairs Training Center
                                                         and application to
                                                          passport clerk
                                                                                                                         Employee checks with
                                                                                                                     personnel technician to ensure
                                                                                                                     that residence and dependents
                                                                                                                     report form is properly filled out
                                                           Employee returns to
                                                            picks up passports
                                                                                                                       Spouses/adult dependents
                                                                                                                     register in Family Liaison Office
                                                                                                                         skills bank, if applicable

                                                     Employee submits passports
                                                      and visa applications to get
                                                          visas, if necessary

                                                     Employee returns to passport
                                                          office to pick up
                                                        passports with visas

               B                                                   B                                B                                                B

Optional steps, which can be done in any order.

                                           Page 31                                                           GAO/NSIAD-98-19 State Department
                                          Appendix I
                                          The Department of State’s Employee
                                          Relocation Process (Washington to Post

               B                                                   B                   B                                      B

                                                       Employee departing from
                                                          State checks out of                       Employee checks with Office
                                                        Foreign Service Lounge                        of Overseas Schools,
                                                       where he or she fills out a                         if applicable
                                                              leave plan

                                                           Employee arrives
                                                             at new post

                                                     Gaining post sends notice of
                                                       arrival, by cable, which is
                                                    routed to personnel and payroll

                                                    Personnel technician receives
                                                          notice and initiates a
                                                    Notification of Personnel Action

                                                    Payroll changes employees pay,
                                                        primarily locality pay, and
                                                     transfers pay and leave record
                                                        to overseas payroll center

Optional steps, which can be done in any order.

                                          Page 32                                          GAO/NSIAD-98-19 State Department
Appendix II

Differences Between the State Department
and Some Organizations Employing Best
Practices for International Transfers

Best practice                    State                              Ford                               Texaco
Centralized program              No—currently administered in       Yes—International Service          Yes—Expatriate Service Center
Administration                   several bureaus and/or offices     Center                             and Texaco Relocation Center
One point of contact for         No—numerous points of              Yes—one counselor in the           Yes—one point of contact in
transferring employee            contact in several bureaus and     International Service Center       Expatriate Service Center
                                 offices required to complete the   coordinates all aspects of the     coordinates the transfer
                                 transfer                           transfer
Integrated information systems   Partial—the Bureau of           Partial—data centralized but not      Yes—purchased an integrated
                                 Personnel’s new integrated      linked electronically                 system from consultant and
                                 system will upgrade information                                       linked with existing information
                                 capability for parts of the                                           systems
                                 transfer process
• Travel                         Yes                                Yes                                Yes
• Move management                No                                 Yes                                Yes
• Household effects counseling   Partial, some contractors used     Yes                                Yes
• Tax consulting                 Not applicable                     Yes                                Yes
• Home sales                     Not applicable                     Yes                                Yes
• Orientation                    No                                 Yes                                Yes
• Medical                        No                                 No                                 No

                                           Page 33                                                   GAO/NSIAD-98-19 State Department
Appendix III

Comments From the Department of State

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.

                             Page 34   GAO/NSIAD-98-19 State Department
                 Appendix III
                 Comments From the Department of State

See comment 1.

See comment 2.

See comment 3.

                 Page 35                                 GAO/NSIAD-98-19 State Department
                 Appendix III
                 Comments From the Department of State

See comment 4.

See comment 5.

See comment 6.

See comment 7.

                 Page 36                                 GAO/NSIAD-98-19 State Department
               Appendix III
               Comments From the Department of State

               The following are GAO’s comments on the Department of State’s letter
               dated August 29, 1997.

               1. Although State is taking actions to improve many of its systems, its
GAO Comments   position of delaying action to improve its transfer process because of
               other reengineering and consolidation initiatives contributes to
               long-standing and costly inefficiencies in one of the Department’s key
               operations. We believe that (1) the reengineering initiatives already
               underway in the Department have helped create a climate of support for
               new and more efficient ways of doing business, (2) the transfer process is
               a logical extension of the systems being reengineered, and (3) the working
               groups charged with reorganizing the foreign affairs agencies can and
               should incorporate these and other best practices in their analyses.
               Although State took some actions, it essentially failed to satisfactorily
               address the transfer process problem in the mid-1990s as part of its
               Strategic Management Initiative. Given the inefficiencies involved and the
               cost savings that would follow, we believe State should not miss this
               opportunity to take timely and meaningful action. A large number of
               employees’ quality of life would be improved and numerous other benefits
               could be derived from a reengineered process.

               2. State’s concern that Ford Motor Company would not be a good model
               for it to consider appears based on the Department’s misinterpretation of
               information in our draft report. Our draft report did not state that Ford’s
               relocation costs total hundreds of millions of dollars annually. It said that
               Ford officials believed that the company’s new International Service
               Center had enabled Ford to better manage its international assignment
               process that costs hundreds of millions of dollars annually. Ford officials
               had used the terminology “international assignment process” to describe
               the total investment Ford has made in its overseas operations, including
               employee relocation, salaries, equipment, infrastructure, and so forth. We
               modified our report to reflect this point. We strongly believe that the best
               practices of Ford, as well as those of the other companies described in our
               report, provide a good basis for State to reengineer its relocation process
               to reduce costs and improve services. Those best practices include
               one-stop shopping for employees, centralization of the transfer
               administration function, outsourcing, development of information systems
               to track and coordinate transfers, and greater use of door-to-door
               shipments for employees’ household effects.

               Page 37                                       GAO/NSIAD-98-19 State Department
Appendix III
Comments From the Department of State

3. We recommended that State develop an integrated information system
to manage its reengineered transfer process, adding that it should be done
either with off-the-shelf technologies or information resource initiatives
already underway in the Department. Some of the companies that we
benchmarked have used off-the-shelf systems from major vendors, and
State documents indicate that, as part of its modernization strategy, it
plans to identify commercial off-the-shelf products as options for
designing a comprehensive resource management system. The thrust of
our recommendation is that State should build on the numerous initiatives
underway in the Department to modernize systems and link agency
processes. The development of an information system to support a
reengineered transfer process would be a logical part and/or extension of
the overall modernization process.

4. We support the Department’s efforts to reengineer its medical clearance
processes and its consideration of several options for improving medical
services. Although State believed that outsourcing should not be
considered until the reengineering has been completed, our
recommendation is designed to encourage the Department to consider all
practical options for reengineering, including outsourcing. The
experiences of the private sector, as well as State’s own data, indicate that
outsourcing is a reengineering option that can produce greater efficiency
and better service for certain processes.

5. Although State agreed that door-to-door shipments should be increased,
the data it provided is misleading concerning the actual level of progress
made by the Department. Specifically, State provided data showing that
the number of door-to-door shipments have increased 37 percent in the
past 3 years. While this may appear progressive, it is misleading because
the total number of shipments sent door-to-door in 1996 represented only
about 10 percent of those that could have utilized this method. Clearly,
State has a lot of room to expand its use of door-to-door shipments and
reap the financial benefits.

6. We asked State to provide data supporting its claim that it cost an
average of $6,000 more using the door-to-door method for shipments to
Mexico. State could not substantiate this claim.

7. We believe that the greater use of door-to-door shipments by the
European Logistical Support Office further confirms our conclusion that
State can and should expand the use of such shipments. We believe that it
also demonstrates that door-to-door shipments are a viable alternative for

Page 38                                        GAO/NSIAD-98-19 State Department
Appendix III
Comments From the Department of State

overseas posts, eliminating the need to incur the additional expenses
associated with channeling posts’ shipments through the European
Logistical Support Office in Antwerp, Belgium.

Page 39                                      GAO/NSIAD-98-19 State Department
Appendix IV

Major Contributors to This Report

                        Diana M. Glod
National Security and   Michael J. Courts
International Affairs   Edward D. Kennedy
Division, Washington,   Jesus A. Martinez
                        Rona Mendelsohn
D.C.                    Lynn B. Moore
                        Jodi M. Prosser
                        La Verne G. Tharpes

                        Richard P. Burkard
Office of the General   Richard Seldin

(711206)                Page 40               GAO/NSIAD-98-19 State Department
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