GAO

United States General Accounting Office

Testimony

Before the Subcommittee on Military Readiness, 

Committee on Armed Services, House of Representatives

For Release 

Expected at

11:00 a.m., EST

Thursday,

March 18, 1999

DEFENSE 

TRANSPORTATION

Efforts to Improve DOD’s 

Personal Property Program

Statement by David R. Warren, Director, Defense

Management Issues, National Security and International

Affairs Division

GAO/T-NSIAD-99-106

Page 1 GAO/T-NSIAD-99-106

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss the Department of Defense’s 

(DOD) efforts to improve its program for relocating military personnel and 

their families. This has been a long, complicated process. Since 1994, DOD 

has been engaged in initiatives to reengineer the personal property 

program to simplify current processes, control program costs, ensure 

quality of service by adopting commercial business processes 

characteristic of world-class businesses, and relieve carriers of 

DOD-unique terms and conditions. The U.S. Transportation Command 

(USTRANSCOM) is tasked with evaluating the pilots to determine which 

pilots, or portions thereof, could provide better long-term results for DOD.1

 

The statement of managers in the conference report on the DOD 

Appropriations Act for 1997 directed us to validate the results and savings 

achieved from any personal property program before DOD proposes 

further expansion of such programs.2

 My testimony today will focus on our 

ongoing work related to the Army’s Hunter pilot and DOD’s plans to 

evaluate other ongoing and planned pilot programs. In assessing the 

Army’s evaluation of the Hunter Pilot, we focused on (1) the evaluation 

methodology and (2) the Army Audit Agency’s (AAA) validation of the test 

and baseline data.

Results in Brief We agree that DOD needs to reengineer its personal property moving 

process to improve the poor quality of service military members are 

receiving. We support the use of pilots as a means to test new concepts. 

Although this process has been ongoing since the early 1990s, DOD is not 

yet in a position to determine what changes are needed.

We were unable to validate the reported results of the Army’s evaluation of 

the Hunter pilot because of weaknesses in the evaluation methodology and 

the data. However, the lessons learned from the pilot do provide 

information that should be useful to DOD as it assesses and conducts its 

pilot efforts. Further, the Hunter pilot provides military personnel with 

1The mission of USTRANSCOM, which is DOD’s single manager of all defense transportation services, 

is to provide global air, land, and sea transportation to meet national security needs, both in time of 

peace and time of war. USTRANSCOM executes its mission through three component commands: 

Military Traffic Management Command (MTMC) for land transportation and port operations, the 

Military Sealift Command for sea transport, and the Air Mobility Command for air transport.

2

House Report 104-863, Sept. 28, 1996.
Page 2 GAO/T-NSIAD-99-106

services that were not previously available during the moving process, 

including personal move counseling and coordination, full replacement 

value for lost or damaged household goods, and visibility of the shipment 

throughout the move.

Key pilot results that we were unable to validate included the level of 

customer satisfaction and costs. Although customer surveys were 

conducted, the results were inconclusive because of the methods used. 

While the Army indicated that the estimated pilot cost was higher than the 

baseline cost, we could not validate the extent to which the pilot cost 

exceeded the baseline cost. Further, we could not calculate the baseline 

and pilot costs due to weaknesses in the Army’s methodology and data 

reliability. As for the participation of small businesses, we confirmed that 

33 percent of the pilot shipments were awarded by Cendant Mobility to 

small business carriers and agents.

DOD has three pilot programs underway to improve its current personal 

property program and is proposing a fourth pilot. The general plan is to 

evaluate the results of these pilots and use that information to develop a 

redesigned Department-wide relocation program. To achieve this 

objective, it is imperative that DOD develop a well thought out strategy 

with clear time lines for testing each of the approaches, and more 

importantly, an evaluation methodology that will produce credible and 

accurate information to be used in making a final decision. However, plans 

for accomplishing these tasks and milestones for implementing a new 

process have not yet been finalized.

Background DOD has long been concerned about the quality service members receive 

from its nearly $3 billion annual program to transport, store, and manage 

the household goods and unaccompanied baggage of its personnel. Past 

problems include poor service from its movers, excessive incidence of loss 

or damage to service members’ property, and high claims costs to the 

government. All of these problems contribute to a poor quality of service 

for persons using the system.

MTMC’s Reengineering 

Efforts Began in 1994

DOD first proposed reengineering its personal property program 5 years 

ago. On June 21, 1994, the Deputy Commander in Chief, USTRANSCOM, 

directed MTMC, the Army component of USTRANSCOM and program 

manager for DOD’s Personal Property Shipment and Storage Program, to 

reengineer the personal property program. On June 15, 1995, the House 
Page 3 GAO/T-NSIAD-99-106

Committee on National Security, concurring that DOD must pursue a 

higher level of service, directed that DOD undertake a pilot program to 

implement commercial business practices and standards of service.3

 

MTMC planned to award contracts for the new program pursuant to the 

competitive acquisition system provisions (chapter 137 of title 10 of the 

U.S. Code and the primary implementing regulation contained in the 

Federal Acquisition Regulation). Expressing congressional concerns about 

the impact that the competition system and any nonstandard commercial 

business practice requirements might have on small businesses, the 

statement of managers accompanying the 1997 DOD Authorization Act 

directed that DOD report on the impact of the pilot program on small 

business. After reviewing the defense reports on small business impact, 

the House Committee on National Security was still concerned that 

MTMC’s pilot program did not satisfactorily address issues raised by the 

small moving companies and directed that the Secretary of Defense 

establish a working group of military and industry representatives to 

develop an alternative pilot program.

MTMC Pilot Commenced in 

1999

Although the working group reached a consensus on many issues, 

including a set of program goals, it could not reach agreement on the 

approach to take for the pilot test. Consequently, the two sides presented 

separate proposals. In November 1996, we reported that in our assessment 

MTMC’s proposal met the goals of reengineering the personal property 

program to a greater extent than the industry plan.4

The MTMC pilot program implementation, delayed by numerous bid 

protests, finally commenced in January 1999.5

 The pilot reengineers the 

existing program for 50 percent of the moves originating in three states: 

North Carolina, South Carolina, and Florida. The pilot will run 

concurrently with the existing MTMC-managed program at installations in 

the three states and will involve approximately 18,500 annual moves. The 

3

The House Committee on National Security is now called the House Armed Services Committee.

4See Defense Transportation: Reengineering the DOD Personal Property Program (GAO/NSIAD-97-49, 

Nov. 27, 1996) for more detailed information on the MTMC pilot effort.

5

Solicitation disputes in the following decisions: Aalco Forwarding, Inc., et al. (B-277241.8, B-277241.9, 

Oct. 21, 1997); Aalco Forwarding, Inc. et al. (B-277241.12, B-277241.13, Dec. 29,1997); Aalco Forwarding, 

Inc. et al. (B-277241.15, Mar. 11, 1998); Aalco Forwarding, Inc. et al. (B-277241.16, Mar. 11, 1998); Aalco

Forwarding, Inc., et al. (B-277241, 277241.14, June 8, 1998); and Aalco Forwarding, Inc.,

et al. (B-277241, B-277241.20, B-277241.21, July 1, 1998).
Page 4 GAO/T-NSIAD-99-106

key features of the pilot program include selecting carriers based on 

service member satisfaction and past performance rather than simply 

price; achieving stronger carrier commitment with long-term contracts; and 

offering full replacement value protection and direct claims settlement to 

users. MTMC’s pilot will run for a 3-year test period (1 year with two 1-year 

option periods), which will end in September 2002.

Hunter Pilot Effort Began in 

1996

Separately from the MTMC pilot program, the Army decided to determine 

whether the commercial business practice of outsourcing could alleviate 

known problem areas. The pilot was initiated in February 1996 as a 

quality-of-life effort to improve the relocation process and to test 

commercial business practices in a military environment at Hunter Army 

Airfield, Savannah, Georgia. On January 31, 1997, the Army selected PHH 

Relocation, a relocation/move management company (today named 

Cendant Mobility, located in Bethesda, Maryland), as the contractor for the 

pilot. In July 1997, Cendant Mobility began relocation operations at Hunter 

Army Airfield, consisting of point-to-point move management, personal 

move counseling and coordination, assistance in buying/selling a residence, 

24-hour in-transit visibility of the shipment, direct claims settlement with 

the service member, full replacement value, and a single point of contact 

for the member, that were not previously available under the existing 

system. The contract will end on September 30, 1999.

Navy Pilot Effort Began in 

1997

The Navy initiated a separate pilot effort in 1997 to test the option of 

allowing service members to select their carrier, giving them more control 

over the relocation process to meet their specific needs. The pilot, which 

commenced in January 1998, is not intended to replace the existing 

MTMC-managed program and affects a very small number of military 

personnel. Presently, the option is offered for shipments originating in the 

Puget Sound, Washington; San Diego, California; Norfolk, Virginia; and 

Groton, Connecticut areas. Participation is limited to Navy military 

members with permanent change of station orders from the participating 

sites. Eligible participants must limit shipments to at least 3,000 pounds 

and to costs between $2,500 and $25,000 (and it excludes shipments from 

nontemporary storage or warehouse). The service member can select a 

mover from a list of carriers that are self-certified as small businesses and 

approved by MTMC. As of March 1999, 169 Navy service members had 

selected this option. This pilot does not have a specific end date.
Page 5 GAO/T-NSIAD-99-106

DOD Pilot Effort Proposed 

in 1999

On February 12, 1999, DOD stated that it intended to begin a fourth test, 

called the Full Service Moving Project, with certain modifications based on 

lessons learned from the Army Hunter test. The test will involve a larger 

volume of moves and will include the National Capital Region (17,000 

annual moves), Georgia (26,000 annual moves), and North Dakota (2,000 

annual moves). Like the Army pilot, it is intended to replace the existing 

MTMC-managed program by using a contractor or contractors to provide 

both transportation and move management services. Presently, there is no 

official start date for this project.

USTRANSCOM to Evaluate 

All Pilot Programs

To oversee all personal property pilots, the Deputy Under Secretary of 

Defense (Logistics) has tasked USTRANSCOM to ensure consistency in 

evaluation criteria and assessment. USTRANSCOM plans to evaluate the 

pilots to determine which pilots or tests, or portions thereof, could provide 

better long-term results. It will then recommend the follow-on course of 

action and time lines for implementation throughout DOD. Presently, 

USTRANSCOM is working with the services to develop a common set of 

data measures to evaluate the pilot projects’ results. 

Results of Army Hunter 

Pilot Are Inconclusive

Because of the weaknesses in the Army’s evaluation methodology and data, 

we were unable to validate all reported results of the Hunter pilot program. 

Moreover, the Army’s evaluation plan methodology was not an effective 

tool for collecting and analyzing the pilot results. However, the lessons 

learned from the pilot program do provide useful information to DOD as it 

conducts and assesses its pilot efforts. Also, the pilot program is providing 

services and benefits that were not previously available, including 

point-to-point move management, personal move counseling and 

coordination, direct claims settlement, assistance in buying/selling a 

residence, and visibility of the shipment throughout the move.

The Army’s Assessment and 

Evaluation Approach

Through the first 12 months of operations, the Army reported that the 

Hunter pilot was successful in demonstrating that commercial practices 

can be applied to the military relocation process. That is, Army officials 

stated that they were able to contract with a relocation company to provide 

services similar to those available in the private sector. To evaluate the 

pilot, in January 1997, the Army began developing a test evaluation plan 

that defined roles and responsibilities, test factors, and the process for 

capturing data related to each test factor, and stated how test data would 
Page 6 GAO/T-NSIAD-99-106

be compared to that from the existing program. The plan stated that AAA 

would be responsible for validating the baseline and test data and for 

providing the Army with a report on the results of the test. AAA conducted 

a review and its findings are incorporated in our evaluation. We reported in 

June 1998 that the Army needed to further define the various factors and 

measurements.6

 The Army provided more clarity and a revised 

methodology in the evaluation plan dated August 12, 1998. This 

represented the third such revision, which was completed more than a year 

after the pilot had begun. The modified plan indicated that the pilot results 

would be reviewed on the basis of three factors: quality of life, cost, and 

impact on small business—and would use a 5-point scoring system. 

Quality of life was the key element the Army used in its evaluation, 

consisting of 1 point each for its three sub-factors—customer satisfaction, 

average claims settlement time, and percentage of direct deliveries—along 

with 1 point each for the other two factors—total cost and impact on small 

business, for a total of 5 points. 

In its October 1998 evaluation report and February and March 1999 

supplements, the Army reported to us that the pilot project earned a 

passing score on each of the test factors that it measured over the 12-month 

period ending June 30, 1998. The Army determined that the Hunter pilot 

was a success because the factor points exceeded the minimum threshold 

of 3.0 based on a 5.0-point scale. The Hunter pilot test earned 3.75 points, 

as follows: 

• customer satisfaction improved by over 11 percent (0.25 point),

• the initial offer to settle claims averaged 9 days (1 point),

• 100 percent of eligible shipments were delivered directly to the service 

member without storage in transit (1 point),

• Pilot project costs exceeded baseline costs by 18.6 percent (0.50 point), 

and

• 33 percent of the shipments were awarded to small businesses (1 point).

The Army stated that it also considered other factors, generally related to 

transportation process improvements, and did not rely on test scores alone 

to determine the pilot a success. These benefits included simplifying the 

price structure and claims process, providing pre-audit and certification 

services, and minimizing government-unique requirements. Each service 

6

Defense Transportation: The Army’s Hunter Pilot Project to Outsource Relocation Services

(GAO/NSIAD-98-149, June 10, 1998).
Page 7 GAO/T-NSIAD-99-106

member worked with one personal move coordinator who was 

accountable for direct delivery at destination, timely service, and prompt 

resolution of any problems. This is in contrast to the current process 

where a service member may need to contact four to five different offices 

over the course of a single move. Neither AAA nor we reviewed these 

benefits cited by the Army because they were not included as measurable 

factors in the evaluation plan.

Evaluation Weaknesses Led 

to Inconclusive Results

We identified a number of shortfalls with the Army’s evaluation 

methodology and data. In several instances, the data provided to support 

the measurements did not demonstrate achievement of the reported 

results. Most importantly, we could not confirm that customer satisfaction 

improved by 11.5 percent. Further, we could not confirm that all eligible 

shipments were delivered directly without incurring in-transit storage 

costs, that offer of claims settlement time averaged 9 days, and that the 

pilot program cost 18.6 percent more than the baseline cost. We reviewed 

the methodology and data for each factor—quality of life (consisting of 

three sub-factors: customer satisfaction, claims settlement time, and direct 

deliveries); costs; and impact on small business. 

Inconclusive Results for 

Customer Satisfaction

Because service members were surveyed multiple times and the survey 

methodology was flawed, the Army’s reported results on customer 

satisfaction were compromised. Therefore, we could not validate that 

customer satisfaction improved by 11.5 percent. However, data gathered in 

these surveys did provide indicators of customer satisfaction as well as 

provide lessons learned for DOD, USTRANSCOM, and the Army that may 

be useful for conducting their pilot efforts.

To measure customer satisfaction, the Army said it would use its contractor 

(Battelle’s Pacific Northwest National Laboratory) to survey members at 

Hunter and those making similar moves at Fort Stewart, Georgia. 

Responses from service members at both locations would be compared. 

The Army told us that Battelle would conduct the survey, but instead, the 

Army used USTRANSCOM’s survey, conducted by Electronic Data Systems 

(EDS), to evaluate and score the pilot project. Initially, the Army informed 
Page 8 GAO/T-NSIAD-99-106

us that it did not use Battelle’s results because the draft report was difficult 

to interpret and inconclusive. It subsequently expressed concern over a 

disclaimer on the survey results.7

 

Nonetheless, service members were surveyed multiple times, possibly by 

four different entities. EDS and Battelle (the survey contractors), Cendant 

Mobility (which was required by its contract to survey a sample of 

customers), and the carrier (for its own quality control) each may have 

contacted the same service members to query them on their move 

experience. As a result, the customer satisfaction results were 

compromised and produced inconclusive results. EDS reported that some 

service members refused to respond to the survey and that it does not 

know how many of those who did respond only gave perfunctory answers. 

In a caveat in its report, Battelle stated that it was aware that some 

individuals were interviewed multiple times. 

In addition, the contractors’ survey results varied significantly. While EDS 

reported that 11.5 percent of respondents were more satisfied with their 

current relocation experience (the pilot), Battelle reported that only 

3 percent of its respondents were more satisfied.8 We are uncertain of the 

specific reasons for these differences. However, we do know that the 

question asked by the contractors to determine customer satisfaction was 

not identical, and that the number of respondents in the two surveys varied 

significantly. This may have contributed to the differences. EDS had a 

much lower response rate, 53 percent, than Battelle, which achieved an 

89-percent response from service members on which their results were 

calculated. Further, EDS used a 75-percent significance level, while 

Battelle calculated responses using a 95-percent significance level. The 

latter is a standard used in social science research.9

7

The Army said it subsequently learned that the Department of Energy requires such a disclaimer in all 

studies performed for government entities and that the disclaimer had no relevance to the results 

reported by Battelle.

8Battelle also reported that the 3-percent figure was “statistically insignificant,” meaning that the 

variance in responses from the two groups (personnel at Hunter and at Fort Stewart) was not great 

enough to conclude that their move experiences differed significantly.

9

Significance level is the likelihood that a true population value may be rejected by a statistical test. In 

the case of the two surveys, for example, Battelle used a 95-percent and EDS used a 75-percent 

probability that the differences in relocation satisfaction levels were due to something other than 

random occurrence. Battelle found no significant difference in satisfaction levels, with a 5-percent 

chance of reaching an incorrect conclusion. EDS did find a significant difference but with a 25-percent 

chance of reaching an incorrect conclusion.
Page 9 GAO/T-NSIAD-99-106

Other data obtained by the surveys, but not measured by the Army, provide 

indicators of customer satisfaction and highlights areas that could be 

addressed in future evaluations. For example, the Battelle survey found 

that 61 percent of the Hunter respondents were more satisfied with their 

most recent (pilot) moving experience than with their prior move. 

Eighty-seven percent of these respondents were satisfied or very satisfied 

with the carrier’s responsiveness. Both surveys also indicated that service 

members relocating within the continental United States were generally 

more satisfied with the pilot process than personnel moving overseas were. 

The Army cited several examples of problems with overseas moves that 

indicated greater dissatisfaction by those service members, and stated that 

it has taken action to correct some of the problems. 

The surveys also showed that service members liked some unique features 

the pilot offered, such as one-on-one counseling and the simplified claims 

process. However, few service members took advantage of many of the 

additional services that Cendant Mobility offered, particularly assistance in 

house hunting. Moreover, officials representing The Military Coalition, 

which represents five million active duty, retired, reserve, and National 

Guard personnel and their families, told us that more could be done to 

tailor the range of services offered by the relocation company to meet 

unique military needs. Such services, they said, might include more 

assistance in finding rental property because military personnel tend to 

rent rather than purchase, and providing assistance for spouses seeking 

employment. 

Another lesson learned related to access to survey data by outside 

reviewers. AAA and we were unable to verify the survey data because the 

independent survey contractors, citing privacy act restrictions, refused to 

grant access to the original survey documentation. The Army stated that, in 

future pilot projects, it would ensure that service members are not 

subjected to multiple surveys and would establish a better survey method 

for determining customer satisfaction.

Limited Data on Claims 

Settlement Time

Due to weaknesses in the Army’s data collection and analysis, we could not 

validate that the initial offer to settle claims occurred on average in 

9 days after a completed claim form was received by Cendant Mobility. 

While the claims settlement time is one approach to measuring the claims 

process, it does not capture the entire claims process and does not 

measure the extent the process represented an improvement over the 

existing system. The pilot process, however, does offer benefits to the 

service member in terms of full replacement value protection. For 
Page 10 GAO/T-NSIAD-99-106

example, household effects are insured for their replacement value (up to 

$75,000) rather than their depreciated value (which had been capped at 

$40,000). The pilot process also requires less work for the service member 

since the contractor provides estimates on lost and damaged household 

goods, and the contractor pays the service member directly. 

The claims settlement time measurement is based on the contract 

requirement that the contractor offer settlement to a member within 

30 days after receiving a claim for damaged or lost property. Consequently, 

the Army developed a threshold for claims settlement of 30 days. Under 

the current process, we were told that it takes an average 30 days for the 

U.S. Army Claims Service to review a completed claim form and offer 

settlement, and it takes the Defense Finance and Accounting Service an 

additional day to process the payment. Service members may appeal to the 

contractor for reconsideration by providing additional information or file 

an appeal with the Army if resolution with the contractor could not be 

achieved—a process that can take more than 2 years to complete. While 

we found that some claims remained unpaid and unsettled because the 

claims were put “on hold” by the service member, the Army reported that 

no one under the Hunter pilot filed an appeal as of January 1999. 

The Army reported that Cendant Mobility took an average 9 days to offer 

settlement for lost or damaged property, but AAA and we could not confirm 

this because the Army had not collected the necessary data. AAA 

determined, and we concur, that Cendant Mobility may have taken as long 

as an average 28 days to offer settlement. This figure is based on 

measuring the time between the date the claim was signed and the date the 

member was offered settlement. The difference between the two estimates 

is primarily due to an average 19-day period between the date the claim was 

signed and the date the contractor reported that it entered the claim into its 

database. Although Cendant Mobility officials stated that its standard 

company practice is to enter a claim into the database the same day a claim 

is received, delays could be caused by (1) the form being mailed some time 

after it is dated, (2) mail delays, and (3) contractor delays in entering the 

claim into the database. Army officials stated that, due to the difficulties in 

measuring claims settlement time, they would change their data collection 

and analysis of this sub-factor in future pilot programs.

Direct Delivery Results May Be 

Overstated 

We could not confirm that all eligible direct deliveries were made without 

in-transit storage because the necessary data was not collected. Direct 

delivery is defined by the Army as delivery of a shipment to a service 

member’s residence without storage in transit. A shipment is eligible for 
Page 11 GAO/T-NSIAD-99-106

direct delivery only if it has a destination address before the shipment is 

offered for delivery. Direct delivery is a contract performance 

measurement, and the contractor is paid an incentive for maintaining a 

direct delivery rate of over 60 percent. Consequently, the Army threshold 

for this measurement is 60 percent. Measuring direct delivery in this 

manner does not provide the Army sufficient information to determine 

whether the results represent an improvement over the current system.

Neither AAA nor we could confirm that the shipments that were directly 

delivered to service members were the only ones eligible for direct delivery 

because the necessary information on all shipments was not collected. 

That is, other shipments may have been candidates (eligible) under the 

Army criteria; however, AAA and we could not determine which shipments 

had addresses prior to being offered for delivery (and were thus eligible) 

but ended up requiring in-transit storage. The Army acknowledged the 

difficulty in validating eligible direct deliveries and stated that in the future, 

it would consider using in-transit storage costs as a test factor. In the 

February 5, 1999, supplemental information provided to us, the Army 

stated that 74 percent of Army-wide shipments required in-transit storage, 

compared to 66 percent requiring temporary storage during the Army pilot. 

Service members benefit from having household goods delivered directly 

to their homes because the practice limits additional handling of their 

property, reducing opportunities for loss and damage. Also, the 

government avoids temporary, in-transit storage, which is costly and hard 

for the Army to control. Historically, household goods shipments 

frequently require temporary storage because service members often do 

not know at the time of shipment their new address and/or service 

members will not immediately move to the new duty station due to 

vacations or military requirements. 

Cost Data Were Inaccurate and 

Incomplete

We could not validate that 18.6 percent represented the additional cost of 

the pilot project over the baseline cost due to weaknesses in the Army’s 

methodology and the reliability of overhead cost data. As we reported in 

June 1998, developing overhead costs historically has been difficult in the 

government, including DOD, because such data are often unreliable and 

unavailable (see app. I for a detailed breakdown of pilot and baseline 

costs).

Neither AAA nor we could validate some overhead costs. Specifically, we 

could not confirm the accuracy of the overhead costs attributed to MTMC 

because the Army used data from fiscal year 1994. MTMC has changed 
Page 12 GAO/T-NSIAD-99-106

significantly since that time due to downsizing, but AAA could not obtain 

updated costs from MTMC representing the current organization to 

determine the reasonableness of its overhead cost. AAA and we also agree 

that the costs associated with reducing the cost of processing 

documentation (claims, invoices, and inbound) would not result in a cost 

reduction to the government unless the activities that perform these 

functions, such as the Defense Finance and Accounting Service, take 

corresponding action to reduce their costs (for example, eliminating 

personnel to reflect the drop in the workload). 

AAA and we also identified other costs that were not included in the Army’s 

analysis, such as the costs related to awarding the Hunter contract and the 

contractor’s use of foreign-flag vessels. The Army could not provide an 

estimated dollar value associated with the cost of developing the 

solicitation, reviewing offers, and resolving bid protests. While we 

recognize that some of these estimated costs may be infrequent or one-time 

costs, they should be considered. Also, the Army did not factor the 

contractor’s use of foreign-flag vessels into the pilot project’s 

transportation costs.10 While individually, costs such as these are probably 

of low dollar value in relation to other costs in the analysis; collectively, 

they could have an impact on the difference between the baseline and pilot 

costs.

According to the Army, some of the reasons for the higher estimated cost of 

the pilot project can be attributed to (1) the difficulty in calculating 

accurate baseline costs, which the Army believes are understated; (2) the 

low volume of moves—1,400—which did not provide enough leverage to 

negotiate better rates and discounts; (3) higher-than-expected cost of 

overseas shipments; (4) relatively high unaccompanied baggage shipment 

rates, which could have been lower using negotiated rates; (5) the packing 

allowance for “do-it-yourself” moves was incorrectly calculated using 

commercial rates during part of the 12-month test period, which resulted in 

a higher rate; and (6) the fact that, generally, quality moving services cost 

more. In regard to the high cost of overseas shipments, the Army provided 

us with additional details of pilot project costs that showed a 44-percent 

increase for overseas household goods shipments and a 2-percent increase 

for domestic shipments over the baseline cost.

10Foreign-flag vessels are those ships registered in foreign countries.
Page 13 GAO/T-NSIAD-99-106

Impact on Small Business Both AAA and we validated that Cendant Mobility awarded 33 percent of 

the shipments to small businesses—10 percent to small business carriers 

and 23 percent to small business agents. The Army measured the impact of 

the pilot on two types of small business providers (carriers and agents) and 

established a threshold of 23 percent to demonstrate successful 

participation by small businesses.11 The Army based this factor on section 

15(g) of the Small Business Act, which establishes a governmentwide goal 

for participation by small business concerns at not less than 23 percent of 

the value of all prime contracts. Of the 790 billed Hunter shipments during 

the 12-month pilot, the Army reported that 261 (33 percent) were awarded 

by Cendant Mobility to small businesses.

Status of Plans to 

Evaluate the Pilot 

Programs

USTRANSCOM is still in the process of finalizing the evaluation plan for 

other ongoing and planned relocation pilot programs. It is proposing to 

evaluate the pilots on the same three factors that the Army used in its 

evaluation, except the factors will be defined differently and will use a 

more expansive point scale. Unresolved issues, as of February 1999, 

include the development of a method that recognizes the unique 

characteristics and/or process improvements of each pilot program, and 

the validation of the baseline indirect costs that will be used for each of the 

pilot programs. The evaluation plan does not currently include an 

evaluation of the Hunter pilot, but has used lessons learned in the Hunter 

pilot to help develop the plan. We provided comments to USTRANSCOM in 

this process, and among other things, encouraged them to seek expert 

methodological advice before finalizing the evaluation plan to enhance the 

quality of USTRANSCOM’s assessment.

Summary Improving DOD’s personal property program has been a slow, complex 

process. DOD and the services have spent a large amount of time and 

effort to dramatically change the quality of service their military customers 

receive. We support these efforts. However, before any final conclusions 

can be reached, DOD must have accurate and credible data to determine 

the type and extent of changes that should be made. To facilitate a timely 

completion of this process, DOD needs to (1) develop a comprehensive 

strategy for testing a finite number of approaches, (2) specify time lines for 

11In the motor freight and transportation industry, firms with annual gross revenues of $18.5 million or 

less are classified as small businesses. See Federal Acquisition Regulation 19.102.
Page 14 GAO/T-NSIAD-99-106

implementation and completion, and (3) ensure that it has a 

methodologically sound evaluation plan to assess each pilot’s attributes in 

a comparable manner. As it has been in the past, it is important for DOD to 

continue taking into consideration the views of the moving and relocation 

companies that will be affected by changes to the current program.

Mr. Chairman, this concludes my prepared statement. I would be pleased 

to answer any questions you or members of the Subcommittee might have 

at this time.
Page 15 GAO/T-NSIAD-99-106

Appendix I

Pilot and Baseline Costs Calculated by the 

Department of the Army (Office of the Deputy 

Chief of Staff for Logistics) and Validated by Army 

Audit Agency ApeInxdi

aMilitary Traffic Management Command (MTMC) 

Source: Office of the Deputy Chief of Staff for Logistics, Department of the Army

Cost elements

Estimated

 pilot costs

Estimated

 baseline costs

Transportation costs

 1. Transportation $3,005,229 $2,102,384

 2. Accessorials 25,767 30,655

 3. Storage 210,706 211,655

Total transportation costs $3,241,702 $2,344,694

Claims paid by Army

4. Claims paid by Army 0 $66,268

Overhead costs

 5. Personnel $79,802 $221,721

 6. Management price 132,700 0

 7. MTMC headquartersa 0 63,510

 8. Automation 0 52,612

 9. Voucher processing 4,614 90,658

10. Inbound processing 0 46,834

11. Claims processing 0 11,510

12. Pay for performance 14,756 0

13. Building overhead 28,321 43,286

14. Telephone and copier 1,281 10,106

15. Consumables 3,760 5,189

Total overhead costs $265,234 $545,426

Total cost $3,506,936 $2,956,388

Pilot costs

Baseline

costs Difference

Percent of

difference

Percent pilot costs exceeded 

baseline costs $3,506,936 $2,956,388 $550,548 18.6%
Page 16 GAO/T-NSIAD-99-106

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(709408) Letr
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