Defense Transportation:

Defense Logistics Agency's Regional Freight Consolidation Centers

NSIAD-93-169: Published: May 21, 1993. Publicly Released: Jun 18, 1993.

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Pursuant to a congressional request, GAO reviewed the operations of the Defense Logistics Agency's (DLA) regional freight consolidation centers (RFCC), focusing on whether the centers: (1) realized the savings DLA projected; (2) timely delivered freight when required; and (3) maintained accountability for freight in transit.

GAO found that: (1) DLA has not realized the projected cost savings from sending vendor shipments through RFCC because many vendors fail to pass the savings on to DLA, freight volume has been lower than expected, and DLA has not considered more economical alternatives; (2) DLA could save nearly 44 percent in transportation costs by utilizing existing government freight rates and sending shipments directly from vendors to the storage depots; (3) although RFCC have a 90-percent success rate in meeting delivery time requirements, 3 percent of the vendors have cited problems with lost, damaged, and mishandled freight; and (4) DLA could not maintain accountability over its freight in transit due to inaccurate and unreliable information on the extent of intransit losses and the numerous carriers involved.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD stated that it did not plan to expand its RFCC operation but it might possibly relocate existing centers. Due to declining program savings, DLA, on December 22, 1993, decided to terminate the regional freight consolidation centers program. DLA was unable to determine if vendors were passing transportation savings on to DOD in the form of lower contract prices. Pool distribution operations have terminated because in some cases, RFCC increased transit times and associated costs.

    Recommendation: The Secretary of Defense should require the Director, DLA, to postpone the expansion of the regional freight consolidation program pending the results of the team's study.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Department of Defense stated that it had established a review team to determine the extent to which government rates would save procurement costs. The team will examine current transportation and contracting policies and procedures used by DLA, the military services, and industry. Due to declining program savings, DLA, on December 22, 1993, decided to terminate the regional freight consolidation centers program. DLA was unable to determine if vendors were passing transportation savings on to DOD in the form of lower contract prices. Pool distribution operations have terminated because in some cases, RFCC increased transit times and associated costs.

    Recommendation: If the study shows that the benefits to be derived from using government freight rates outweighs the administrative burden, the Director, DLA, should: (1) stop consolidating vendor freight shipments at RFCC; and (2) use existing government freight rates to ship vendor freight directly to storage depots.

    Agency Affected: Department of Defense: Defense Logistics Agency

 

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