DOD also provided cost estimates for implementing the  recommendations. Four of these  issues address the recommendations included in DOD’s November 2002  report to Congress. DOD’s Recommendations Offer Solutions to Long-Standing Problems

The three recommendations in DOD’s report to Congress offer solutions to  several of the current program’s long-standing problems, such as the  liability/claims process and the low quality of service. If  implemented, the first recommendation (i.e., reengineering the  liability/claims process by adopting commercial practices of minimum  valuation, simplifying the filing of claims, and providing direct settlement  with the carrier) has the potential to help reduce the length of time it  currently takes to resolve claims for lost, destroyed, or damaged  household goods because the carrier recovery time would be eliminated  for most moves, increase the reimbursement rates military personnel  receive for their losses, and reduce DOD’s claims-related costs. While the shipments included in the evaluation do  not represent all shipment types managed annually by DOD, we believe  that the evaluation results provide sufficient information to allow DOD to  initiate actions to improve its current personal property program within  budget constraints. Therefore, the ability  to implement changes to the existing program within the cost estimates  reported to Congress is uncertain. Due to the long- standing problems with this program and the high pilot program costs that  contributed to the military services’ early termination of participating in  one of the pilot programs, we believe that by quantifying the risk  associated with this projection, DOD could provide the military services  and Congress information needed to develop and review future budget  requests for this program. Further, without carefully monitoring costs  during the implementation process and assessing costs and benefits from a  period succeeding full implementation of the recommendations, DOD will  not have the information needed to determine if anticipated improvements  in the program are being achieved at a reasonable cost. Soundness of Estimates to Develop Cost for Changing Claims and Contracting Processes Varies

The soundness of the three adjustments the Military Traffic Management  Command used to develop its estimated 13 percent increase over the  current program costs to implement the remaining recommendations—the  claims process and performance-based service contracts—varies. The Military Traffic Management Command did  not provide the same level of evidentiary support that it provided on the  other two adjustments. While DOD did not quantify the risk, per se, it believes a conservative  approach was taken in developing the savings in each of the three  adjustments. Therefore, DOD  was precluded from projecting the extent to which the recommended  improvements can be achieved DOD-wide. Recommendations for Executive Action

To improve the personal property program for military personnel, their  families, and program administrators, we recommend that the Secretary of  Defense direct the Commander, U.S. Transportation Command, to  initiate actions to implement the three recommendations contained in  DOD’s report to Congress within budget constraints,    provide the military services and Congress additional information to  quantify the risk associated with achieving the projected 13 percent   cost estimate before the claims process and performance-based service  contracts recommendations are implemented to provide the military  services with information needed for budgeting purposes,   monitor costs for all recommendations during the implementation  phase to ensure that the proposed changes are being achieved within  an acceptable and a predefined range, and   assess the effects of the three recommendations on the personal  property program (to be carried out after the summertime peak-moving  season once the recommendations have been implemented) to  determine whether the anticipated improvements in the program are  being achieved at a reasonable cost. Without  providing the range of possible cost increases and the risk regarding the  likelihood of achieving this 13 percent projection within that range, DOD  may encounter a repetition of its experience with one of the pilot  programs, which had to be terminated because actual costs exceeded  projected costs. Our finding that the implementation of the information technology  improvements recommendation would likely cost $7 million rather than  the $4 million to $6 million that DOD projected was based on information  we received from DOD during the audit. To determine the reliability of pilot program shipment-related costs  used in the report, we reviewed the data collection efforts used by each  pilot program for the transportation and storage of household goods  included in the Transportation Command’s evaluation. Further, we  reviewed the constructed cost methodology used to develop the  estimates of what DOD would have paid to make comparable  shipments under the current program in the pilot programs’ test areas. This occurred when the match showed a  difference of more than $1.00.
Why GAO Did This Study

The Department of Defense (DOD) spends more than $1.7 billion each year to move and store over 600,000 household goods shipments when relocating military personnel. It conducted and evaluated several pilot program studies aimed at fixing its problem-plagued program and, in 2002, issued a report to Congress with three recommendations. The 1997 Defense Appropriations Act Conference Report directed GAO to validate the results achieved by the pilot programs. In response, GAO examined the extent to which DOD's recommendations to Congress (1) offer solutions to long-standing problems in the current program and (2) are supported by the evaluation's findings and should be implemented. GAO also assessed the soundness of methodologies used by DOD to develop cost estimates to implement the recommendations.

What GAO Found

The recommendations in DOD's report to Congress have the potential to resolve several long-standing problems found in the current personal property program, which manages the transportation and storage of household goods. The recommendations, if implemented, would (1) reengineer the claims process to reduce the length of time it currently takes to resolve claims for lost, destroyed, or damaged household goods and increase the reimbursement rates that military personnel currently receive for their losses; (2) use performance-based service contracts to improve the generally low quality of service that DOD currently gets from the moving industry; and (3) put in place new information technology with interface capabilities to enable program managers and users to monitor in-transit shipments and track the number and cost of shipments processed each year. The recommendations in DOD's report to Congress are supported by the Transportation Command's evaluation of the pilot programs' findings and should be implemented within budget constraints. DOD's approach in conducting the evaluation was methodologically sound: It developed an evaluation plan to guide its work and adjusted the plan when necessary to address differences in the pilot programs' approaches. While the shipments included in the evaluation do not represent all shipment types managed annually by DOD, GAO believes that the evaluation results provide sufficient information to allow DOD to initiate actions to improve its current personal property program. GAO found that the soundness of methodologies used to develop DOD's cost estimates varied. Therefore, DOD's ability to implement changes to the existing program within the cost estimates DOD reported to Congress is uncertain. GAO found that the estimate to implement the information technology recommendation was $7 million rather than the $4 million to $6 million estimate DOD reported to Congress. In developing cost estimates for the remaining recommendations, DOD did not provide the same level of evidentiary support for one of the three adjustments it used to align the pilot programs' costs to current program costs. As a result, GAO questions the extent to which these recommendations can be implemented within DOD's estimated 13 percent increase over current program costs. While DOD believes it used a conservative approach in developing this 13 percent estimate, it has not quantified the risk associated with the projection, which could provide the military services and Congress information needed to develop and review future budget requests for this program. Without providing the range of possible cost increases and the risk regarding the likelihood of achieving this 13 percent projection within that range, DOD may find a repeat of what occurred during the pilots, where the military services terminated participation in one of the pilot programs due to costs exceeding projections. GAO also found that without carefully monitoring costs during the implementation phase and assessing costs and benefits from a period succeeding full implementation of the recommendations, DOD would not have the information needed to determine if anticipated improvements in the program are being achieved at a reasonable cost.