Are Forwarders' Rates for Moving Military Household Goods High Enough To Cover Costs?

Basically, there are two methods of 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. This second method is used in 95 percent of the Department of Defense's (DOD) overseas shipments. The cost of shipments overseas is about $250 million annually.

Prior to 1976, forwarder rates were established under a method whereby forwarders submitted rates to DOD. DOD determined the low rate for each traffic channel and any forwarder who agreed to the low rate shared equally in the business. To introduce more competition into its ratesetting procedures, DOD introduced the Competitive Rate Program. The Competitive Rate Program gave the low bidder most of the tonnage as an incentive to bid low rates. DOD claims the program resulted in savings and improved service. However, forwarders which have established or bid the lowest bids would not agree to let their records be reviewed, so the compensatory nature of rates could not be determined. On the basis of the analyses cited, there is evidence that the rates may have been noncompensatory; the cost to provide the service may have exceeded the revenue earned.