Defense Transportation:

Status of U.S. Transportation Command Savings Initiatives

NSIAD-98-99: Published: May 8, 1998. Publicly Released: May 8, 1998.

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Pursuant to a congressional request, GAO provided information on the U.S. Transportation Command's (USTRANSCOM) savings initiatives, focusing on the: (1) extent to which USTRANSCOM expects to achieve long-term savings in its operating and infrastructure costs; and (2) changes regarding transportation rates and customer charges.

GAO noted that: (1) USTRANSCOM and its components have sought to reduce costs and improve operating efficiencies in the defense transportation system, while at the same time preserving its readiness capabilities and effectiveness; (2) GAO recognizes that reducing transportation charges to defense customers is complicated by multiple factors that impact the ability of USTRANSCOM to affect transportation charges; (3) the lag time, for example, between reducing operating costs and realizing reductions in customer charges means that the impact of some of USTRANSCOM's savings initiatives has yet to occur; (4) at this time, however, it appears that the savings initiatives identified by USTRANSCOM will not yield as great a result as initially reported; (5) the reported savings are not likely to have a significant impact on lowering infrastructure and long-term operating costs, which is the key to reducing customer charges; (6) available data indicate that many costs USTRANSCOM charges its customers are rising at a rate greater than inflation and that surcharges may remain high, even when underlying transportation charges have declined; (7) specifically, only about $260 million of the $780 million reported savings represents reductions to infrastructure and long-term operating costs--savings that could more readily result in lower charges over time to defense customers for transportation services; (8) a small portion of the reported savings actually involves improved revenue collections rather than efforts to reduce long-term operating costs; (9) the reported savings that are to occur between fiscal years 1993 and 1999 represent less than 3 percent of USTRANSCOM's $27-billion working capital fund operating costs during that time period; (10) thus, the extent to which total operating costs might be affected raises questions about the ability of these savings to substantively reduce customer transportation charges; (11) customer rates have been increasing and USTRANSCOM projects increases to continue through the end of the decade; (12) the increases are at or above the rate of inflation; (13) in addition, USTRANSCOM's surcharge continues to be substantially higher than the amount component commands pay commercial carriers; and (14) there where instances where surcharges were increasing significantly even when underlying transportation costs had declined.

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