Adoption Of A Single Method of Shipping Household Goods Overseas--Pros and Cons

LCD-76-225: Published: May 6, 1976. Publicly Released: May 6, 1976.

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Basically, there are two methods for shipping household goods of military personnel overseas--the direct procurement method under which the Government makes arrangements with individual firms for all required services and the international through Government bill of lading method under which the Government pays a household goods forwarder to make the arrangements. In fiscal year 1974 the Department of Defense spent $181 million to move 141,600 household goods shipments between the United States and overseas points. More than 95 percent of these shipments moved under the international through Government bill of lading method. In House of Representatives Report No. 93-662 on the Department of Defense appropriations bill for 1974, the Committee on Appropriations questioned the need for the Department of Defense to use two separate methods for moving service members' household good internationally. The Committee asked GAO to review the feasibility of selecting either a single method of shipment on a worldwide basis or selecting a method for each major shipping point where large numbers of U.S. personnel are stationed.

Although it is uneconomic to administer two systems for shipping household goods overseas, there are reasons why it would not be desirable under present circumstances to adopt either the international through Government bill of lading method or the direct procurement method as the sole system of shipping. A constructed by GAO, the direct cost by the direct procurement method system is, in most instances, lower than the international through Government bill of lading cost. Also, the international through Government bill of lading rates are high in relation to GAO's estimate of the reasonable costs of providing the service. But adopting the direct procurement method of shipping and excluding the household goods forwarding industry: (1) would have an adverse effect on the Department of Defense's program to increase combat strength by decreasing support personnel; (2) could destroy many capable business; and (3) would be contrary to the Government's general policy of relying on the private enterprise system to supply its needs. The international through Government bill of lading methods of shipping in convenient in that the forwarders assume certain administrative and traffic management responsibilities. But the introduction of the international through Government bill of lading method created new management problems, and adopting this method as the sole system would ignore these problems. Another factor to be considered is the need to retain the direct procurement method of shipping as competitive hedge for use in those areas in which the international through Government bill of lading service is not available and for those instances where, because of the size of shipments or other circumstances, the international through Government bill of lading method is not economically feasible. One of the reasons for the high international through Government bill of lading rates appears to be the lack of a sufficiently competitive Department of Defense rate-setting procedure. During 1973, the Department of Defense adopted a more competitive rate-setting procedure for international through Government bill of lading shipments of military unaccompanied baggage moving over certain routes in the Pacific with resulting savings ranging from 20 to 45 percent. The Department of Defense recently initiated more competitive rate-setting procedures on a test basis or household goods shipments moving between the continental United States and Okinawa. As a result, forwarders' rates have been reduced by about 19 percent.

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