Carrier Liability for Domestic Shipments Increased in 1987

In mid-1987, the Military Traffic Management Command (MTMC)—DOD’s traffic manager—increased carrier liability for DOD domestic household goods shipments. Domestic Claims Costs Reduced and Carrier Performance Improved

DOD claims costs declined after DOD increased carrier liability on domestic household goods shipments in 1987. Carrier performance on domestic shipments also improved. Table 2.3 illustrates the impact of increased recovery on Air Force constant dollar claims costs and shows (1) how overall Air Force costs for domestic shipments declined from about $8.7 million in fiscal year 1986 to between $4 million and $5 million in fiscal years 1990 and 1991, (2) how much the Air Force paid carriers for the increased liability, and (3) how the increased liability adjusted the percentage of overall claims costs paid by the Air Force and household goods carriers. Only the Air Force met REVAL expectations. Comments From the Department of Defense

DOD concurred with our findings and recommendation. In commenting on this report, the AMC said that carrier liability should not be increased to the $1.25 rate on international shipments because nothing was achieved by increasing carrier liability on domestic shipments except that liability for shipment loss and damage was transferred from DOD to the carrier. MTMC officials do not have adequate information with which to evaluate individual carrier performance. We found that MTMC claims data has major omissions.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed changes proposed by the Military Traffic Management Command (MTMC) regarding carrier liability for loss and damage on Department of Defense (DOD) domestic shipments.

What GAO Found

GAO found that: (1) carrier performance has improved since DOD increased carrier liability on domestic household goods shipments; (2) although DOD claims costs declined by an estimated $18.9 million between fiscal years 1987 and 1991, only the Air Force achieved the expected level of cost recovery from carriers; (3) DOD needs to increase carrier liability on DOD international shipments so that DOD can recover the cost of damages and improve carrier performance; (4) industry officials believe that changes in carrier liability on international shipments could cause major industry disruptions unless carriers are compensated in exchange for the increased liability; and (5) MTMC does not have adequate claims information to assess individual carrier performance or the costs associated with increased carrier liability.