To determine whether DOD is providing cost-effective and efficient transportation and to identify what factors drive transportation costs, we analyzed data on the current USTRANSCOM and component command structure including costs and number of DOD transportation personnel. To determine whether any actions are necessary to ensure a successful reengineering of defense transportation that will improve efficiency and reduce costs, we reviewed data and reports on USTRANSCOM and Office of the Secretary of Defense reengineering efforts, plans, and status; reviewed and analyzed reports regarding successful reengineering techniques and guidelines for assessing reengineering efforts; contacted and interviewed various defense transportation system commercial cargo carriers and customers, including representatives of the U.S. European Command, the U.S. Air Force-Europe, the U.S. Army-Europe, the U.S. Central Command USTRANSCOM Liaison Officer, and the Army-Air Force Exchange Service. However, it is the total cost that the customer pays that is of concern. Major Factors That Drive High Defense Transportation Costs

Major factors that drive USTRANSCOM’s defense transportation costs higher are (1) USTRANSCOM’s fragmented and inefficient organizational structure and management processes and (2) the need to maintain a mobilization capability. Much of DOD cargo today moves intermodally, by air, land, and sea transport. However, USTRANSCOM retains an outdated and inefficient, modally oriented, organizational structure, with many collocated facilities. Moreover, the fragmentation adds more people to the organizational structure than needed. Customers receive a bill from each component command for each mode of transportation, rather than a single intermodal bill from only one component. Separate billing systems are inefficient, adding people and cost, and confusing to customers who pay for the inefficiencies. Table 3.1 shows a breakdown by component command. As discussed earlier, MTMC operates an extensive port structure, supported by more than 1,200 staff and costing over $70 million for salaries and wages alone in fiscal year 1994. While this structure may be needed to provide a mobilization capability, it may not be necessary to move cargo during peacetime. These ports are largely unused during peacetime because cargo moves by commercial carriers through commercial ports, although many of the personnel are actively engaged in documenting shipments and other management areas. However, resulting contributed revenue does not cover the costs of operations due to the mobilization requirement. The study found that the defense transportation system continued to be replete with redundant organizational structure and inefficient and costly processes. However, both efforts postpone any actions related to organizational structure issues until after process changes are completed.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed whether the Department of Defense (DOD) is providing cost-effective and efficient transportation operations, focusing on: (1) the factors that increase DOD transportation costs; and (2) DOD efforts to reengineer its transportation operations.

What GAO Found

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.