USTRANSCOM and its component commands operate under the Working Capital Fund system of financial management. 1.) The congressional defense committees have raised concerns regarding USTRANSCOM’s infrastructure. Customer satisfaction is another element that impacts the ability to reduce transportation costs. Our Analysis of USTRANSCOM Reported Savings and Effect on Reducing Infrastructure and Operating Costs

USTRANSCOM and the component commands have taken action to improve customer service, reduce costs, and improve operational efficiency. To the extent that these savings are expected to be realized, we found that most of the reported savings, over $400 million, would not reduce long-term operating costs, and that only a relatively small portion of the savings, about $260 million, was apt to result in reductions to transportation rates for users of the defense transportation system. Another $120 million actually involved improved revenue collections rather than efforts to reduce long-term operating costs. We found that USTRANSCOM and the component commands project increases in most common user transportation rates at or above the rate of inflation through fiscal year 1999, indicating that total customers’ charges are continuing to increase as well. As previously mentioned, $258 million of reported savings are likely to impact customer rates. Accordingly, this raises significant questions about the ability of these savings to substantively reduce charges. USTRANSCOM responded that the examples “. Our examples highlight the USTRANSCOM surcharge, that is the difference between what USTRANSCOM pays commercial carriers for basic underlying transportation services and what it charges its customers, illustrating the costs customers pay for USTRANSCOM and component command operating costs. Even if all the reported savings directly affected long-term operating costs, the $780 million in savings represents only about 3 percent of $27 billion in estimated TWCF operating costs during the same period. Consequently, we remain concerned that transportation charges to its military customers are unnecessarily high. Scope and Methodology

To determine the extent to which USTRANSCOM expects to achieve long-term savings in its operating and infrastructure costs, we assessed the savings it reported to Congress in December 1996, including subsequent testimony that reported $780 million, cumulatively, in savings initiatives. We attempted to trace the savings to the affected budget accounts with the supporting documents and to validate the amount of the savings and their applicability to reducing transportation charges to defense customers. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the U.S. Transportation Command's (USTRANSCOM) savings initiatives, focusing on the: (1) extent to which USTRANSCOM expects to achieve long-term savings in its operating and infrastructure costs; and (2) changes regarding transportation rates and customer charges.

What GAO Found

GAO noted that: (1) USTRANSCOM and its components have sought to reduce costs and improve operating efficiencies in the defense transportation system, while at the same time preserving its readiness capabilities and effectiveness; (2) GAO recognizes that reducing transportation charges to defense customers is complicated by multiple factors that impact the ability of USTRANSCOM to affect transportation charges; (3) the lag time, for example, between reducing operating costs and realizing reductions in customer charges means that the impact of some of USTRANSCOM's savings initiatives has yet to occur; (4) at this time, however, it appears that the savings initiatives identified by USTRANSCOM will not yield as great a result as initially reported; (5) the reported savings are not likely to have a significant impact on lowering infrastructure and long-term operating costs, which is the key to reducing customer charges; (6) available data indicate that many costs USTRANSCOM charges its customers are rising at a rate greater than inflation and that surcharges may remain high, even when underlying transportation charges have declined; (7) specifically, only about $260 million of the $780 million reported savings represents reductions to infrastructure and long-term operating costs--savings that could more readily result in lower charges over time to defense customers for transportation services; (8) a small portion of the reported savings actually involves improved revenue collections rather than efforts to reduce long-term operating costs; (9) the reported savings that are to occur between fiscal years 1993 and 1999 represent less than 3 percent of USTRANSCOM's $27-billion working capital fund operating costs during that time period; (10) thus, the extent to which total operating costs might be affected raises questions about the ability of these savings to substantively reduce customer transportation charges; (11) customer rates have been increasing and USTRANSCOM projects increases to continue through the end of the decade; (12) the increases are at or above the rate of inflation; (13) in addition, USTRANSCOM's surcharge continues to be substantially higher than the amount component commands pay commercial carriers; and (14) there where instances where surcharges were increasing significantly even when underlying transportation costs had declined.