Defense Transportation

The military often pays as much as three times as much as commercial carriers would charge to ship cargo because of a fragmented and inefficient organizational structure and outdated management practices at the U.S. Transportation Command. This situation has led to confusing billing practices and expensive staff overhead. For example, a military customer might pay the U.S. Transportation Command $3,800 to ship a load of cargo from California to Korea, while a commercial carrier would have charged only $1,250 for the shipment. Much of today's military cargo moves intermodally, by air, land, and sea transport. Under the U.S. Transportation Command's unwieldy organizational structure, customers receive bills from each command for each mode of transportation, rather than a single bill covering the entire shipment. In addition to confusing customers, separate billing systems increase personnel and costs. Salaries and wages alone for the command in fiscal year 1994 topped $1 billion.

GAO found that: (1) defense transportation costs are substantially higher than necessary; (2) DOD customers frequently pay prices for transportation services that are double or triple the cost of the basic transportation; (3) key factors driving these costs are the U.S. Transportation Command's (USTRANSCOM) fragmented and inefficient organizational structure and management processes, and the need to maintain a mobilization capability; (4) much of defense cargo today moves intermodally, by air, land, and sea transport, but USTRANSCOM retains an outdated and inefficient, modally oriented, organizational structure, with many collocated facilities; (5) each separate component command incurs operational and support costs, and customers receive bills from each component command for each mode of transportation, rather than a single intermodal bill from only one component; (6) separate billing systems are inefficient, adding people and costs, and confusing to customers who pay for the inefficiencies; (7) USTRANSCOM maintains an extensive water port structure, employing more than 1,200 people, at a cost in fiscal year 1994 of over $70 million; (8) the ports are largely unused during peacetime because most cargo moves commercially, but the port facilities do provide capacity that may be needed for a wartime surge; (9) DOD's guidance for handling the cost of maintaining a mobilization capability doe not cover all situations in which USTRANSCOM components charge their customers for costs that appear to be for mobilization requirements; (10) while DOD has recently begun reengineering the defense transportation system to improve its processes and reduce costs, it is not concurrently looking at how the organizational structure should be redesigned; (11) DOD will address organizational structure only after the process changes have been completed; and (12) GAO's work shows that the inefficiency of the organizational structure has been a long-standing issue in addressing the effectiveness of defense transportation, and waiting to address this issue until process improvements are made will likely represent a significant barrier to achieving the full benefits of the reengineering efforts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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