Defense Transportation:

DOD Has Adequately Addressed Congressional Concerns Regarding the Cost of Implementing the New Personal Property Program Initiatives

GAO-05-715R: Published: Jun 9, 2005. Publicly Released: Jun 9, 2005.

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Military personnel and their families can expect to relocate many times during a servicemember's career. As the moving industry's single largest customer, the Department of Defense (DOD) spends more than $1.7 billion annually for its personal property program, which provides household goods transportation and storage services for military personnel and their families when they relocate. The program manages more than 600,000 personal property shipments each year. For more than 10 years, DOD has been pursuing various initiatives for improving the quality of its personal property program. In June 2002, the U.S. Transportation Command completed an extensive study that compared the features of the current personal property program with three pilot programs that tested alternative approaches for improving the current program. In November 2002, DOD issued a report to Congress that included three recommended program improvement initiatives resulting from this study and estimated that an additional 13 percent increase over current program costs would be required to implement two of these initiatives. In April 2003, we reported on the pilot program evaluation and stated that the recommendations contained in DOD's November 2002 report offered solutions to long-standing problems in the personal property program and should be implemented within budget constraints. However, we raised concerns about whether the two recommendations related to the claims and contracting processes could be implemented within the projected 13 percent cost estimate. Our concerns were partially based on DOD not adequately substantiating the expected economies of scale that supported its assumption of a 5 percent reduction in average prices under the pilot program when a full-scale program is implemented. As a result, we recommended that DOD quantify the risk associated with the cost estimate before DOD's recommended initiatives are implemented. In its May 2004 report on the National Defense Authorization Act for Fiscal Year 2005, the House Armed Services Committee directed the Secretary of Defense to reevaluate DOD's proposed cost estimate, quantify the risk or likelihood of achieving its goals within the 13 percent projected cost increase, and develop a range of possible cost increases associated with the risk. The committee also directed GAO to review and report on whether DOD adequately performed these tasks.

The methodology used by DOD to address congressional concerns--reevaluate its cost estimate, quantify the risk associated with achieving the 13 percent cost increase, and establish a range of possible cost increases--was reasonable for conducting such assessments. In its reevaluation of the cost estimate, DOD validated the current mix of household goods shipments to ensure that the mix used in the original assessment was appropriate. DOD also provided additional support for its assessment of the anticipated savings that would result from expanding the pilot to all of DOD. Furthermore, the results of DOD's risk-based simulation analysis, which included establishing ranges of possible cost increases, indicated that about 80 percent of the time, DOD could implement the recommended initiatives to improve the current program with an increase of 15 percent or less above current program costs.

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