DOD Commercial Transportation:

Savings Possible Through Better Audit and Negotiation of Rates

NSIAD-92-61: Published: Dec 27, 1991. Publicly Released: Dec 27, 1991.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) efforts to control commercial transportation costs, focusing on: (1) whether DOD audited shipping bills prior to payment; and (2) how DOD could improve traffic and travel management programs.

GAO found that: (1) DOD has implemented a preauditing system that has helped prevent millions of dollars in overpayments; (2) DOD could strengthen some auditing aspects and take steps to ensure that preaudits are thorough; (3) when overcharging occurred, DOD did not notify transportation officials who prepared the shipping documentation so that they could take the appropriate corrective actions to prevent future overcharges; (4) because the Military Sealift Command (MSC) has not developed and does not provide carriers with adequate proposal information, it is difficult for carriers to offer competitive rates and MSC ability to effectively evaluate those offers is weakened; (5) since transportation services are procured on a through basis, the MSC practice of soliciting and evaluating rates by segments distorts the rate offers' significance and complicates the evaluation process; and (6) the DOD process for negotiating rates for moving DOD personnel's domestic household goods inhibited competition by allowing carriers to meet the initial low bid during subsequent bidding phases.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD initially set out to implement the recommendation. However, the Defense Appropriations Act, 1993 (P.L. 102-396, Oct. 6, 1992), prohibited DOD from obligating funds to implement any test of changes in its domestic interstate household goods program as proposed in the June 29, 1992, "Federal Register". As that prohibition was not carried forward in subsequent appropriations acts, DOD can make another attempt to implement the recommendation. To date, it has not made public its plans.

    Recommendation: The Secretary of Defense should direct MTMC to accelerate its efforts to implement the GAO recommendation to replace or modify the current two-step bidding process so that all carriers have an incentive to initially bid the lowest possible rates and the lowest bidder is appropriately rewarded.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: MSC asked for and received rates based on single-factors, as recommended. Rates became effective October 1992. More rates were asked for and received in fiscal years 1993 and 1994.

    Recommendation: The Secretary of Defense should direct MSC to change its solicitations to request rates for the same pattern of service for which DOD actually procures the service.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: MSC is providing prospective bidders information that should allow them to more intelligently respond to DOD's requirements.

    Recommendation: The Secretary of Defense should direct MSC to develop and provide to all prospective offerors detailed information on what it has shipped in terms of specific commodities and number of containers between specific traffic patterns, as well as its best estimate of what it will be shipping in the future.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD requested that the General Services Administration (GSA) provide DOD with the results of GSA audits. The military departments and the Defense Finance and Accounting Service are trying to compare GSA postaudit results with the DOD preaudit results. Although the results have not been reviewed fully, the efforts clearly meet the intent of the recommendations.

    Recommendation: The Secretary of Defense should direct the Military Traffic Management Command (MTMC) and other units performing preaudits to test the effectiveness of their preaudits by comparing the results with bills audited after payment.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: DOD requested that GSA provide DOD with the results of GSA audits. The military departments and the Defense Finance and Accounting Service are trying to compare GSA postaudit rsults with the DOD preaudit results. DOD is working to see that timely information of the GSA audits is provided to local installation transportation officials to help prevent overcharges. Although the results have not been reviewed fully, the efforts clearly meet the intent of the recommendations.

    Recommendation: The Secretary of Defense should direct MTMC and other units performing preaudits to develop a system for ensuring the timely notification of local installation transportation officials when preaudits detect overcharges.

    Agency Affected: Department of Defense

 

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