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DOD Can Improve Claims Recovery on Direct Procurement Method Shipments

NSIAD-94-39: Published: Nov 29, 1993. Publicly Released: Dec 8, 1993.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) efforts to recover monetary damages from responsible government contractors for lost or damaged personal property shipped under the DOD direct procurement method (DPM), focusing on whether DOD is: (1) attempting to recover as much as possible; and (2) filing claims against the contractors actually responsible for the loss or damage.

GAO found that: (1) DOD usually attempts to recover damages from destination DPM contractors who may not be responsible for the damaged property; (2) destination contractors are presumed liable for loss or damages unless they can prove otherwise, but they rarely provide acceptable evidence that others are responsible for property loss or damage; (3) claims officials have followed service claims regulations and instructions, but they have not fully recovered monetary damages and have forced the destination contractors to increase their rates to offset damage claims; (4) origin DPM contractors and freight carriers have not received feedback that could improve their quality of service; (5) claims officials generally do not attempt to recover damages from other than the destination contractors because they do not have access to other parties' contracts; (6) claims regulations do not accurately explain recovery options, liability assessments, or how to establish cases against parties other than destination contractors; and (7) claims officials do not have accurate transportation documentation for determining the cost-effectiveness of pursuing claims against freight carriers who usually have higher liability limits than other contractors.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Although the Personal Property Traffic Management Regulation required that released valuation be shown on the bills of lading, the Military Traffic Management Command informed all shipping offices of the importance of proper compliance (Oct. 26, 1993). In addition, a quality control plan for the DPM shipping method was scheduled for completion by the end of fiscal year 1994.

    Recommendation: The Secretary of Defence should direct the Commander, Military Traffic Management Command, to clarify its transportation guidance to ensure that all DPM freight carrier bills of lading accurately show the released valuation, or carrier liability, under which DPM shipments are made.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In addition to the training reported in response to the first recommendation, and the publishing of the Army handbook for DPM recovery guidance, Navy and Marine Corps personnel are now training their personnel and the Air Force revised the new Air Force instruction on claims (AFI 51-502) with a detailed description of the DPM shipment process and various freight carriers' liability rates.

    Recommendation: The Secretary of Defense should direct the service secretaries to revise and clarify contracting, claims, and transportation guidance to ensure that they show how to make a case for recovery for loss or damage from someone other than the destination contractor.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In addition to the training reported in response to the first recommendation, and the publishing of the Army handbook for DPM recovery guidance, Navy and Marine Corps personnel are now training their personnel and the Air Force revised the new Air Force instruction on claims (AFI 51-502) with a detailed description of the DPM shipment process and various freight carriers' liability rates.

    Recommendation: The Secretary of Defense should direct the service secretaries to revise and clarify contracting, claims, and transportation guidance to ensure that they establish whose responsibility it is to inspect shipments at all transfer points along the DPM movement chain.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In addition to the training reported in response to the first recommendation, and the publishing of the Army handbook for DPM recovery guidance, Navy and Marine Corps personnel are now training their personnel and the Air Force revised the new Air Force instruction on claims (AFI 51-502) with a detailed description of the DPM shipment process and various freight carriers' liability rates.

    Recommendation: The Secretary of Defense should direct the service secretaries to revise and clarify contracting, claims, and transportation guidance to ensure that they put the destination contractors on notice about the documentary evidence that they must provide claims offices if they want to make a case to overcome their presumption of liability.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In addition to the training reported in response to the first recommendation, and the publishing of the Army handbook for DPM recovery guidance, Navy and Marine Corps personnel are now training their personnel and the Air Force revised the new Air Force instruction on claims (AFI 51-502) with a detailed description of the DPM shipment process and various freight carriers' liability rates.

    Recommendation: The Secretary of Defense should direct the service secretaries to revise and clarify contracting, claims, and transportation guidance to ensure that they specify what the liability is for each contractor and freight carrier handling DPM shipments.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: In addition to the training reported in response to the first recommendation, and the publishing of the Army handbook for DPM recovery guidance, Navy and Marine Corps personnel are now training their personnel and the Air Force revised the new Air Force instruction on claims (AFI 51-502) with a detailed description of the DPM shipment process and various freight carriers' liability rates.

    Recommendation: The Secretary of Defense should direct the service secretaries to revise and clarify contracting, claims, and transportation guidance to ensure that they fully and accurately explain the options available to the claims officials to recover from someone other than the destination contractor.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: DOD maintained that to require that such information be obtained before recovery in each claim was unnecessary. DOD agreed, however, that claims offices should be aware of the liability provisions in the various contracts pertaining to DPM shipments. The Army conducted training of personnel from worldwide field claims offices and published a DPM handbook; the Navy will distribute the handbook to its field offices; the Air Force has informed its offices of the GAO report, distributed the Army claims book, and updated its training.

    Recommendation: To improve the claims recovery process for DPM shipments, the Secretary of Defense should direct the service secretaries to require that all claims offices be made aware of the provisions of all the various contracts used in the movement of DPM shipments before deciding to file DPM recovery claims against any contractor(s).

    Agency Affected: Department of Defense

  8. Status: Closed - Not Implemented

    Comments: DOD did not agree that the contract clause should be changed to consider shared liability. GAO believes that DOD's plans concerning the other findings and recommendations should be sufficient to accomplish improved DPM claims recovery.

    Recommendation: If DOD is not successful in getting feedback to appropriate officials, the Secretary of Defense should consider revising the standard clause in DPM contracts to hold both the origin and destination contractors liable and have them share the cost of loss and damage on a predetermined basis. This basis should be sufficient to provide incentive for improving the origin packing and containerization.

    Agency Affected: Department of Defense

 

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