Defense Transportation

Since the late 1940s, several studies have characterized the organizational structure of defense traffic management as costly and inefficient. Multiple agencies have been involved in defense traffic management, each with separate service and modal responsibilities. GAO reported in 1996 that the fragmentation and duplication inherent in this structure led to higher transportation costs for defense customers. (See GAO/NSIAD-96-60.) This report discusses the (1) Defense Department's (DOD) progress in reengineering defense transportation financial management processes, (2) challenges associated with implementing these reengineered processes agencywide, and (3) extent to which DOD is assessing the infrastructure required to support the reengineered processes.

GAO noted that: (1) progress has been made in reengineering defense transportation financial management processes through a reform initiative; (2) the goal is to reduce costs, eliminate government-unique documentation, reduce data requirements, improve accuracy, and adapt best commercial practices; (3) DOD has proposed two separate efforts to accomplish the initiative: (a) use an electronic payment system (PowerTrack); or (b) use contractors to perform traffic management functions, including transportation payment, to achieve cost savings and other benefits; (4) the electronic payment system facilitates the replacement of cumbersome government-unique documentation with simplified commercial documentation, and DOD began using the system at 69 military installations as of September 1, 1999; (5) DOD plans to test whether the payment function, plus other transportation functions, can be contracted to a third-party logistics provider to reduce infrastructure and achieve cost efficiencies; (6) although the electronic payment system is being implemented now, the commercial contract initiative has not yet begun the prototype testing phase; (7) DOD faces challenges in implementing the electronic payment system agencywide; (8) the most significant challenge will be the need to modify the system to accommodate the existing unique interagency billing process; (9) transportation costs may increase because the electronic system imposes a fee on carriers that may be passed on to defense customers through higher transportation rates; (10) agency officials have acknowledged the need to determine if a commercial contract with a third-party logistics provider can meet DOD contingency and surge requirements; (11) DOD could not estimate the infrastructure reductions for the contracting out effort because such reductions cannot be estimated until completion of the prototype testing; (12) DOD has no plans to compare the cost and benefits of the two approaches to determine which could more effectively achieve its goals in reengineering the transportation financial management processes; and (13) although DOD's Government Performance and Results Act of 1993 Performance Plan for fiscal year 2000 identifies general goals for its financial management initiative, there are no specific savings targets or overall performance-oriented measures that relate to such things as cost reductions and other improvements.

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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