United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Military Readiness, Committee on

National Security, House of

Representatives

February 1996 DEFENSE

TRANSPORTATION

Streamlining of the

U.S. Transportation

Command Is Needed

GAO/NSIAD-96-60

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-266061 

February 22, 1996

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military

 Readiness

Committee on National Security

House of Representatives

Dear Mr. Chairman:

This report responds to a request by the former Chairman, Subcommittee on Readiness, House

Committee on Armed Services, that we determine whether the Department of Defense can

provide efficient and effective defense transportation in a changing national security

environment. The report contains recommendations to the Secretary of Defense concerning the

organization of the U.S. Transportation Command and its component commands—the Military

Traffic Management Command, the Military Sealift Command, and the Air Mobility Command.

We are sending copies of this report to the Secretaries of Defense, the Army, the Navy, and the

Air Force; the Commander-in-Chief, U.S. Transportation Command; and the Director of the

Office of Management and Budget.

Please contact me at (202) 512-4300 if you or your staff have any questions concerning this

report. Major contributors to this report are listed in appendix V.

Sincerely yours,

Henry L. Hinton, Jr.

Assistant Comptroller General
Executive Summary

Purpose A number of studies since World War II have found that defense traffic

management processes are fragmented and inefficient, reflecting the

conflicts and duplication inherent in a traffic management organizational

structure consisting of multiple transportation agencies, each with

separate service and modal responsibilities. As a result, various actions

have been taken to move functions from one transportation agency to

another and improve military transportation effectiveness. In 1987, the

Secretary of Defense, recognizing the need for additional improvements,

established the U.S. Transportation Command (USTRANSCOM) to unify

defense transportation under a single manager during war, contingencies,

and exercises. In 1992, the Secretary expanded USTRANSCOM’s role to

include peacetime transportation.

The former Chairman of the Subcommittee on Readiness, House

Committee on Armed Services, asked GAO to determine whether the

Department of Defense (DOD) can provide efficient and effective defense

transportation in a changing national security environment. Specifically,

GAO’s objectives were to determine (1) whether DOD is providing

cost-effective and efficient transportation, (2) what factors drive

transportation costs, and (3) whether any actions are necessary to ensure

a successful reengineering of defense transportation that will improve

efficiency and reduce costs.

Background As the single DOD manager of all defense transportation services,

USTRANSCOM executes its mission through three component

commands—the Army’s Military Traffic Management Command (MTMC),

for land transportation and port operations; the Navy’s Military Sealift

Command (MSC), for sea transport; and the Air Force’s Air Mobility

Command (AMC), for air transport. Within this report, defense

transportation refers to common-user transportation, defined by DOD as

transportation and transportation services provided on a common basis

for two or more DOD agencies and, as authorized, non-DOD agencies.

USTRANSCOM’s responsibilities include financial management of all defense

transportation. It operates under the Defense Business Operations Fund

(DBOF) system of financial management. Under this concept, DOD

customers place orders with the component commands, which then

contract for the services and/or provide the services using their own

resources. In turn, the component commands charge customers for their

services. Customers predominately use funds from their operations and

maintenance appropriations to reimburse the component commands. The

Page 2 GAO/NSIAD-96-60 Defense Transportation
Executive Summary

component commands use these reimbursements to pay their suppliers or

to fund the cost of expending in-house resources.

In fiscal year 1994, USTRANSCOM and its components paid approximately

$5.6 billion to provide defense transportation services. These costs

included purchased transportation and administrative and support costs

incurred by USTRANSCOM and its component commands.

Results in Brief Defense transportation costs are substantially higher than necessary. DOD

customers frequently pay prices for transportation services that are double

or triple the cost of the basic transportation. For example, customers may

pay MTMC and MSC $3,800 to arrange movement of a container load of cargo

by commercial carriers from California to Korea; however, DOD is charged

only $1,250 by the commercial carrier for this service.

Key factors driving these higher costs are USTRANSCOM’s fragmented and

inefficient organizational structure and management processes, and the

need to maintain a mobilization capability. Separate processes are a

product of separate commands. Much of defense 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. Each separate component command

incurs operational and support costs. Customers receive bills 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. Salaries and wages alone for the commands in fiscal

year 1994 were more than $1 billion. Another factor driving higher costs is

the need to maintain a mobilization capability. For example, USTRANSCOM

maintains an extensive water port structure, employing more than 1,200

people, at a cost in fiscal year 1994 of over $70 million. The ports are

largely unused during peacetime because most cargo moves commercially.

However, the port facilities do provide capacity that may be needed for a

wartime surge. DOD’s guidance for handling the cost of maintaining a

mobilization capability does not cover all situations in which USTRANSCOM

components charge their customers for costs that appear to be for

mobilization requirements.

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. It will

Page 3 GAO/NSIAD-96-60 Defense Transportation
Executive Summary

address organizational structure only after the process changes have been

completed. GAO’s work shows that the inefficiency of the organizational

structure has been a long-standing issue in addressing the effectiveness of

defense transportation. 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.

Principal Findings

Defense Transportation

Costs Are High

Customers using defense transportation services pay substantially more

than the component commands do for basic commercial transportation.

GAO developed a number of examples to show the disparity between what

USTRANSCOM pays for commercial transportation services it procures and

what MSC and MTMC charge their customers. GAO focused its work on MTMC

and MSC as examples because they basically have similar organizational

structures. However, while the examples do not specifically address AMC,

GAO notes that AMC does have staff performing transportation functions

similar to MTMC and MSC such as shipment routing and billing.

At the time of GAO’s review, customers requesting basic containerized

water transportation from the U.S. East Coast to Europe were charged

double the underlying ocean carrier costs. For shipments from the U.S.

West Coast to Japan and Korea, customers were charged nearly triple the

underlying costs. For high-volume military shipping routes from interior

points in the United States to interior points overseas, customers were

sometimes charged double the underlying carrier costs.

Fragmented Traffic

Management Processes,

Modally Oriented

Organizational Structure,

and Mobilization Costs Are

Major Factors Driving

Higher Transportation

Costs

Higher defense transportation costs are driven by process fragmentation,

duplication, and overlap within the component commands and the need to

maintain mobilization capability. Transportation processes—such as rate

negotiation, shipment routing, cargo documentation, and financial

management—are fragmented, resulting in multiple hand offs of

information, extensive checking, and control. A DOD customer’s request for

overseas defense transportation services may require as many as five

separate units’ actions within MTMC and MSC to obtain the needed service to

move a single shipment. The customer is often billed by five separate

activities within the component commands to reimburse the components

for their specific modal services.

Page 4 GAO/NSIAD-96-60 Defense Transportation
Executive Summary

Further, separate organizations require separate staffs and separate

supporting infrastructures, the costs of which are ultimately included in

customer charges. For example, USTRANSCOM’s personnel costs for salaries

and wages in fiscal year 1994 were about $1.2 billion, or about 20 percent

of its expenses. GAO’s analysis showed that, many times, people of two or

more components, performing identical functions, are located at the same

sites.

Lastly, costs to maintain a transportation mobilization capability also drive

higher transportation costs. For example, MTMC’s extensive port structure,

supported by more than 1,200 staff, costing over $70 million in fiscal year

1994, provides a mobilization capability that may not be necessary to move

cargo during peacetime. The ports are largely unused during peacetime

because cargo moves by commercial carriers through commercial ports.

Additionally, MSC, for some high-volume shipping routes, often uses other

than the low-cost carrier to maintain a mobilization capability. Ultimately,

USTRANSCOM’s customers pay for maintaining this capability through the

rates they are charged by MTMC and MSC. Although DOD policy mandates

that direct appropriation funding be used for maintaining capability to

expeditiously respond to mobilization conditions, DOD’s guidance does not

cover all situations in which USTRANSCOM components charge their

customers for costs that appear to be for mobilization requirements.

Reengineering Efforts

Must Integrate

Long-standing

Organizational Issues to

Achieve Optimum Results

A long-standing concern—the defense transportation system’s

organizational structure and the issues of duplication and overlap inherent

in it—is interfering with DOD’s ability to successfully reengineer the

transportation system and achieve optimum results. The existing

component command structure has resulted in separate and isolated

transportation processes along service lines and perpetuated inefficient

transportation processes. Given the history of reluctance to change the

organizational structure, it is essential for DOD to consider organizational

structure changes as an integral part of reengineering its business

processes.

Over the years, studies have recommended unifying traffic management in

one organization to improve defense transportation and reduce costs. The

recommendations were not implemented because of opposition from the

component commands, the services, the Joint Chiefs of Staff, or the

Congress. Even after its designation as the single DOD manager of defense

transportation during peace and war, USTRANSCOM has retained the same

component command structure that existed prior to its establishment.

Page 5 GAO/NSIAD-96-60 Defense Transportation
Executive Summary

In 1994, a USTRANSCOM study found that the defense transportation system

continues to be replete with redundant organizational structure and

inefficient and costly processes. As a result, USTRANSCOM and the Office of

Secretary of Defense are taking steps to reengineer the defense

transportation system. Both efforts include actions to improve and

consolidate fragmented processes such as procurement and financial

management. However, both efforts postpone any actions related to

organizational structure issues until after process changes are completed.

By delaying organizational structure changes, DOD runs the risk of

superimposing reengineered processes on a fragmented, inefficient, and

costly component command organizational structure. If these

reengineering efforts integrate processes and organizational structure

issues, DOD’s ability to successfully improve efficiency and reduce costs

will be significantly enhanced.

Recommendations GAO recommends that the Secretary of Defense ensure that the defense

transportation reengineering efforts simultaneously address process and

organizational structure improvements. Specifically, the reengineering

efforts should confront, at a minimum,

• the need for separate traffic management component command

headquarters staff,

• the consolidation of separate field subordinate command traffic

management staff, and

• then, the elimination of all remaining duplicative field-based subordinate

command support staff.

Additionally, GAO recommends that the Secretary clarify which USTRANSCOM

mobilization costs should be passed along to its customers. The amounts

and purpose of any such costs should be contained in transportation

component command annual financial statements and in the budget

justification statements submitted annually to the Congress.

Agency Comments

and GAO’s Evaluation

DOD provided written comments on a draft of this report. It generally

agreed with the report’s findings and recommendations. DOD

acknowledged the difference between the defense transportation system

and private industry charges, as well as the direct impact defense

transportation business processes have on the charges DOD customers pay.

DOD attributed the difference in part to readiness/mobilization and

overhead costs, and the fact that billing rates are established 18 months

Page 6 GAO/NSIAD-96-60 Defense Transportation
Executive Summary

prior to budget execution. DOD said it is addressing these problems in an

ongoing defense transportation reengineering initiative.

DOD stated that it is pursuing the objectives of the report’s

recommendations as part of its’ reengineering initiative. DOD explained

that in a May 3, 1995, memorandum, the Deputy Secretary of Defense

directed the Under Secretary of Defense (Acquisition and Technology) to

reengineer defense transportation processes. In response to the

memorandum, the Under Secretary established a task force to develop a

Transportation Reengineering Action plan. The plan, completed on

June 30, 1995, addressed four major initiatives—developing a

transportation vision, reengineering transportation acquisition processes,

reengineering transportation financial management processes, and

assessing the infrastructure required to support the proposed

reengineered processes. The plan will also address handling

readiness/mobilization costs. The first initiative, developing a

transportation vision, was completed October 25, 1995.

DOD stated that the goal of the reengineering effort is to create a joint,

global, seamless, intermodal transportation system that eliminates and

reduces infrastructure. Based on GAO’s preliminary review of the plan, it

agrees with the plan’s goals including a review of the handling of

readiness/mobilization costs, but notes that previous DOD studies

recommending reductions in defense transportation infrastructure have

not always been fully implemented. In this regard, GAO plans to monitor

DOD’s implementation of its plan.

Page 7 GAO/NSIAD-96-60 Defense Transportation
Contents

Executive Summary 2

Chapter 1 

Introduction

10

USTRANSCOM and Component Command Responsibilities and

Organizational Structure

10

Objectives, Scope, and Methodology 12

Chapter 2 

Defense

Transportation Costs

Are High

15

Defense Transportation Process 15

Customer Charges Are Substantially Higher Than the Amount the

Component Commands Pay the Commercial Carriers

16

Agency Comments and Our Evaluation 18

Chapter 3 

Major Factors That

Drive High Defense

Transportation Costs

20

Fragmented Management Processes and Inefficient Organization

Structure Drive Defense Transportation Costs Higher

20

Multiple Organizational Elements Also Drive Costs Higher 24

Mobilization Costs Also Drive Defense Transportation Expenses

Higher

33

Conclusions 35

Agency Comments and Our Evaluation 35

Chapter 4 

Reengineering Efforts

Must Integrate

Long-standing

Organizational Issues

to Achieve Optimum

Results

37

Need for Change Recognized by DOD 37

Conclusions 39

Recommendations to the Secretary of Defense 40

Agency Comments and Our Evaluation 40

Appendixes Appendix I: Comparison of Carrier Costs With Charges to

Customers

42

Appendix II: Component Command Organizations 45

Appendix III: History of Attempts to Realign Defense

Transportation

48

Appendix IV: Comments From the Department of Defense 51

Appendix V: Major Contributors to This Report 57

Page 8 GAO/NSIAD-96-60 Defense Transportation
Contents

Tables Table 2.1: Examples Comparing Carrier Costs With Amounts

Charged to USTRANSCOM Customers

17

Table 3.1: USTRANSCOM Costs 25

Table 3.2: Examples of Collocated or Closely Located Offices 26

Table 3.3: MTMC Port and Terminal Staff 31

Table 3.4: MSC Port Facility Staff 33

Table I.1: Shipment Examples Comparing Carrier Costs with

Amounts Charged to USTRANSCOM Customers

42

Figures Figure 1.1: Organizational Structure of USTRANSCOM 11

Figure II.1: MTMC 45

Figure II.2: MSC 46

Figure II.3: AMC 47

Abbreviations

AMC Air Mobility Command

CONUS Continental United States

DBOF Defense Business Operations Fund

DBOF-T Defense Business Operations Fund-Transportation

DOD Department of Defense

GAO General Accounting Office

MSC Military Sealift Command

MTMC Military Traffic Management Command

USTRANSCOM U. S. Transportation Command

Page 9 GAO/NSIAD-96-60 Defense Transportation
Chapter 1 

Introduction

The U.S. Transportation Command (USTRANSCOM) was created in 1987 to

unify defense transportation under a single manager during war,

contingencies, and exercises. In 1992, the Secretary of Defense directed

that USTRANSCOM’s mission be expanded to provide air, land, and sea

transportation in time of peace and war.

USTRANSCOM and

Component Command

Responsibilities and

Organizational

Structure

The mission of USTRANSCOM is to provide air, land, and sea transportation

for DOD, both in time of peace and war. USTRANSCOM executes its mission

through the three transportation component commands—Military Traffic

Management Command (MTMC), Military Sealift Command (MSC), and Air

Mobility Command (AMC). The responsibilities of each of the component

commands are as follows:

• MTMC, the DOD manager for traffic management, land transportation, ocean

terminals, and intermodal container management, manages freight

movement, personal property shipment, and passenger traffic worldwide,

operates water terminals throughout the world, and monitors traffic

movements through all terminals.

• MSC, the DOD manager for sealift, is a ship operator and contracting agency

for commercial shipping necessary to deliver cargo and petroleum

worldwide and manages the Afloat Prepositioning Force that is used for

forward deployment and early on-site availability of supplies and

equipment.

• AMC, the DOD manager for airlift, is an airlift operator and the contracting

agency for commercial augmentation airlift for wartime deployment of

fighting forces and support of peacetime activities.

Figure 1.1 shows that the organizational structure of USTRANSCOM is divided

into three separate transportation component commands: AMC, MTMC, and

MSC.

Page 10 GAO/NSIAD-96-60 Defense Transportation
Chapter 1 

Introduction

Figure 1.1: Organizational Structure of USTRANSCOM

Central
 Atlantic Pacific Europe Far East

Technical


Activity

Transportation


Engineering


Agency

Western


Area

Eastern


Area

Airlift and Air
 Europe Pacific

Refueling


Wings,


Mobility


Operations and


Support


Groups,


Mobility


Support Group

Airlift and Air


Refueling


Wings,


Mobility


Operations and


Support


Groups,


Air Refueling


Group

15th Air


Force

21st Air


Force

Mid-


Atlantic

West


Pacific

Mediterranean

Medium


Port


Commands

Medium


Port


Commands

Squadrons,


Groups and


Flights

Squadrons,


Groups and


Flights

Units, Offices, Representatives

Direct


Reporting


Units, Field


Operating


Agencies

Field


Operating


Activity

AMC - Headquarters MTMC - Headquarters MSC - Headquarters

U.S. Transportation Command - Headquarters

Major


and


Medium


Port


Commands

Major


and


Medium


Port


Commands

Source: USTRANSCOM, AMC, MTMC, and MSC mission directives.

Financial Management USTRANSCOM is also the DOD financial manager for all defense transportation1

in peace and war and is responsible for managing the transportation

portion of the Defense Business Operations Fund (DBOF) as of October 1,

1992. The portion of DBOF attributable to transportation is called

1

Within this report, defense transportation refers to common-user transportation, defined by DOD as

transportation and transportation services provided on a common basis for two or more DOD agencies

and, as authorized, non-DOD agencies.

Page 11 GAO/NSIAD-96-60 Defense Transportation
Chapter 1 

Introduction

DBOF-Transportation (DBOF-T). Through DBOF-T, the component commands

establish the rates they charge customers for services that are rendered

through the defense transportation system. These rates are intended to

cover all the costs of providing services, including the cost of overhead,

such as USTRANSCOM headquarters’ operating costs. Customers pay for

transportation services and the associated overhead through their

appropriated funds.

DBOF guidance requires that USTRANSCOM recover its total costs from its

customers, including total operating costs for all organizations. However,

DBOF policy requires that the prices customers pay for transportation

services are to reflect peacetime operating costs only. Mobilization costs

are to be funded through direct appropriations.

Objectives, Scope,

and Methodology

The former Chairman of the Subcommittee on Readiness, House

Committee on Armed Services, asked us to determine whether the

Department of Defense (DOD) can provide efficient and effective defense

transportation in a changing national security environment. Specifically,

our objectives were to determine (1) whether DOD is providing

cost-effective and efficient transportation, (2) what factors drive

transportation costs, and (3) whether any actions are necessary to ensure

a successful reengineering of defense transportation that will improve

efficiency and reduce costs.

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. We

also analyzed staffing and operational data for organizations within both

the USTRANSCOM headquarters and the component commands. In addition,

we analyzed (1) current cost and billing data to identify trends and

(2) DBOF-T data to determine how defense transportation costs are charged

back to customers. With regard to customer prices, we compared what the

components were charging their customers and what the components

were paying for the underlying transportation. In doing so, we analyzed a

number of representative shipments made through MTMC and MSC. We

traced the history of USTRANSCOM and the component command structure,

including reviews of prior presidential commission, congressional

committee, DOD, independent consultant, and USTRANSCOM studies and

reports on defense transportation.

Page 12 GAO/NSIAD-96-60 Defense Transportation
Chapter 1 

Introduction

To identify potential duplication of functions among the various

organizational levels, we analyzed functional, process, and support tasks

according to roles and mission statements and conducted extensive

headquarters and field level data collection interviews and discussions to

categorize functions, processes, and tasks as hands-on, transportation

information process support, and/or administrative/management. We

performed the same analyses to identify whether tasks being performed at

various locations had to be performed at those specific locations.

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. We

also reviewed data and documents from these representatives to obtain a

broad base perspective of carrier and customer comments regarding the

current defense transportation system structure and results.

Work was conducted at:

• Headquarters, USTRANSCOM, Scott Air Force Base, Illinois;

• Headquarters, AMC, Scott Air Force Base, Illinois;

• AMC, 15th Air Force, 60th Aerial Port Squadron, Travis Air Force Base,

California;

• Headquarters, MTMC, Falls Church, Virginia;

• MTMC-Eastern Area, Bayonne, New Jersey;

• MTMC-Western Area, Oakland Army Base, California;

• MTMC-1302nd Major Port Command, Oakland, California;

• MTMC-Europe, Rotterdam, Netherlands;

• MTMC-1318th Medium Port Command, BENELUX, Rotterdam, Netherlands;

• MTMC-Wheeler Army Air Field, Hawaii;

• MTMC-1316th Medium Port Command, Yokohama, Japan;

• Headquarters, MSC, Navy Yard, Washington, D.C.;

• MSC-Atlantic, Bayonne, New Jersey;

• MSC-Pacific, Oakland, California;

• MSC-Far East, Yokohama, Japan;

• MSC-Europe, London, United Kingdom;

Page 13 GAO/NSIAD-96-60 Defense Transportation
Chapter 1 

Introduction

• Headquarters, U.S. European Command, Stuttgart, Germany;

• USTRANSCOM Liaison Officer for the European Command, Stuttgart,

Germany;

• Headquarters, U.S. Army-Europe, Heidelberg, Germany;

• Headquarters, U.S. Air Force-Europe, Ramstein Air Base, Germany;

• Office of the Deputy Chief of Staff for Logistics, Army Transportation,

Washington, D.C.;

• Office of the Assistant Commander for Navy Material Transportation, Navy

Supply Systems Command, Arlington, Virginia;

• Office of the Deputy Chief of Staff for Installations & Logistics, U.S.

Marine Corps, Arlington, Virginia;

• Office of the Assistant Executive Director for Transportation, Defense

Logistics Agency, Alexandria, Virginia;

• Army-Air Force Exchange Service-Pacific Transportation Center, Oakland,

California;

• Army-Air Force Exchange Service-Atlantic Transportation Center,

Bayonne, New Jersey;

• Office of the Joint Chiefs of Staff, Washington, D.C.; and

• offices of commercial ocean carriers—American President Lines, Ltd., and

Sea-Land Service, Inc., Oakland, California.

We also contacted and interviewed members of the private sector

responsible for reengineering efforts within corporate entities, and

collected and analyzed reengineering information they provided as it

relates to defense transportation. For example, we spoke with officials

from American President Lines and Aetna Casualty and Life. We also

reviewed and analyzed pertinent logistics, reengineering, and

transportation studies prepared by major consulting firms, and discussed

observations and conclusions in those reports with representatives

responsible for preparing them.

DOD provided written comments on a draft of this report. These comments

are presented and evaluated in chapters 2, 3, and 4, and are reprinted in

appendix IV. DOD also provided other detailed comments for our

consideration. We considered these comments and made changes as

appropriate to our report.

We conducted our work between August 1994 and September 1995 in

accordance with generally accepted government auditing standards.

Page 14 GAO/NSIAD-96-60 Defense Transportation
Chapter 2 

Defense Transportation Costs Are High

Customers using defense transportation services pay substantially more

than USTRANSCOM’s component commands do for basic commercial

transportation. What USTRANSCOM’s component commands charge their

customers to meet transportation requirements often far exceeds,

sometimes two and three times, what the commands pay to obtain those

services. Our analysis of the key cost factors making up these charges is

discussed in chapter 3.

Defense

Transportation

Process

Defense transportation services for sustainment and, to a somewhat lesser

extent, deployment are for the most part arranged through and provided

by the commercial transportation sector. Most cargo is shipped on

commercial U.S.-flag ships, moved pursuant to contracts with commercial

ocean carriers, and is loaded on and off their ships by private sector or

carrier labor. To the extent the cargo can be shipped in intermodal

containers, it is shipped in containerized service.

The rates the component commands charge for services must cover the

expenses USTRANSCOM incurs for the commercial services plus all other

direct, indirect, and overhead expenses. For example, MSC is responsible

for negotiating the rates and terms of carriage with the ocean carriers and

paying their invoices. MTMC is responsible for booking service for

individual shipments, preparing shipment documentation, clearing

customs, and supporting MSC’s payment processes. Each must develop a

budget and determine how much to charge its customers for each service

to be provided.

The rates are developed before the component commands know what the

commercial carriers will charge DOD. Moreover, in any given year, the rates

may include a factor to recover losses or return profits from prior years’

operations. Consequently, rates for a given shipping route from year to

year may double or be cut in half even when the commercial carriers’ rates

showed little or no change.

Page 15 GAO/NSIAD-96-60 Defense Transportation
Chapter 2 

Defense Transportation Costs Are High

Customer Charges

Are Substantially

Higher Than the

Amount the

Component

Commands Pay the

Commercial Carriers

Our analysis of the component commands’ charges for arranging cargo

movements on many of DOD’s high-volume, container cargo routes shows

that the charges, in total, are substantially higher—from 24 to 201 percent

higher—than the amounts carriers charge DOD. Although the charges of an

individual component command may not always be higher than what the

component command pays the carriers, the total (combined MSC/MTMC)

charges for each shipment in our analysis were substantially higher than

DOD’s carrier costs.

We developed a number of case examples that illustrate the high costs

customers pay. (See table 2.1.) They were based on charges for typical DOD

shipments, each consisting of general (dry) cargo, 47 measurement tons

each, transported in commercial carrier 40-foot containers, at rates for the

low-cost carrier on each route, during the first quarter of fiscal year 1995.1

The examples reflect charges MSC and MTMC bill their customers for the

costs they incur for negotiating rates with commercial carriers used to

move DOD shipments; for contracting with the underlying carrier and

paying its charges; and for the administrative expenses incurred to

document the shipments and handle booking, manifesting, receiving, and

customs clearance. The MSC/MTMC charges are compared with the costs of

the underlying carrier—in each case, the low-rate carrier. It should be

noted that we did not add to the carrier charges any costs that the

customers might otherwise incur were they to do the work themselves or

have some third party do it for them because customers may not have

needed such services for every shipment or they may have been able to

provide such services at little or no additional cost using existing traffic

management staff. A more comprehensive set of examples is shown in

appendix I.

1

In these and other examples, DOD was contractually obligated to pay a charge based on full use of the

container—here, 59 measurement tons. MSC bases its charges to its customers on the same minimum.

MTMC bases its charges on the actual tonnages, without a minimum.

Page 16 GAO/NSIAD-96-60 Defense Transportation
Chapter 2 

Defense Transportation Costs Are High

Table 2.1: Examples Comparing Carrier Costs With Amounts Charged to USTRANSCOM Customers

A. Port-to-Port Shipment Cost Comparisons (no local drayage at origin or destination)a

Example A.1

From: U.S. East Coast (any port in range)

To: Europe (any port in range)

Cost of low-rate carrier: $1,552.88 Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 112 percent

Example A.2

From: U.S. West Coast (any port in range)

To: Korea (any port in range)

Cost of low-rate carrier: $1,280.89 Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 198 percent

B. Port Area-to-Port Area Shipment Cost Comparisons (local drayage at origin and destination)

Example B.1

From: Military Ocean Terminal, Bayonne, N.J.

To: Bremerhaven, Germany

Cost of low-rate carrier: $1,712.18 Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 92 percent

Example B.2

From: Military Ocean Terminal-Bay Area, Oakland, Calif.

To: Pusan, Korea

Cost of low-rate carrier: $1,267.32

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 201 percent

C. Inland Point-to-Inland Point Shipment Cost Comparisons (line-haul transportation at origin and destination)

Example C.1

From: Mechanicsburg, Pa.

To: Frankfurt, Germany

Cost of low-rate carrier: $2,380.65

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 38 percent

(continued)

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Example C.2

From: Defense Distribution Depot Red River, (Texarkana), Tex.

To: Kaiserslautern Germany

Cost of low-rate carrier: $2,711.05 Amount charged by USTRANSCOM: $3,616.98 (breakdown:

MSC: $2,545.85; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 33 percent

Example C.3

From: Lathrop, Calif.

To: Seoul, Korea

Cost of low-rate carrier: $1,723.39

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 121 percent

aDrayage is any required transportation of the container within a port area or commercial zone, by

truck or rail, to or from the ship.

MSC and MTMC move or handle other types of shipments, such as in other

sized containers, in noncontainerized service, or in import service. The

charges for these moves will vary accordingly. However, most DOD cargo

moves as general cargo, in containerized export service, in 40-foot

containers, making the examples in the table representative of DOD

shipments.

Agency Comments

and Our Evaluation

DOD partially concurred with our findings. DOD acknowledged the

difference between the defense transportation system and private industry

charges. It attributed the difference to readiness/mobilization and

overhead costs for the entire defense transportation system, which was

designed to support both peacetime and mobilization/wartime

transportation. According to DOD, peacetime, industrial policy, and

readiness/mobilization costs are not always severable; and, if all

readiness/mobilization costs were excluded, the difference between

defense transportation costs and private industry charges would be

reduced. It further pointed out that billing rates are established 18 months

prior to budget execution. Such stabilized rates are affected by

accumulated operating result factors, which can result in lower, or higher,

charges for some movements.

We basically agree with DOD’s comments. With regard to the last comment,

our report acknowledges that individual component command charges

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were on occasion lower than the underlying transportation costs.

However, it is the total cost that the customer pays that is of concern.

Regardless of what the underlying transportation cost is, the customer is

always billed more to cover the costs for the excessive defense

transportation infrastructure, as well as the costs associated with

maintaining a mobilization/readiness capability.

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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. Separate processes are a product of separate commands. 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. In fiscal

year 1994, USTRANSCOM’s total expenses for defense transportation services

were $5.6 billion. Neither USTRANSCOM nor the component commands,

however, collect financial information in a manner that allows actual and

total cost of the organizational structure to be developed. Mobilization and

readiness requirements are also key cost drivers, but again, financial

information is not collected and reported in a manner that clearly

distinguishes the associated costs for these factors.

Fragmented

Management

Processes and

Inefficient

Organization

Structure Drive

Defense

Transportation Costs

Higher

Factors driving costs of defense transportation higher include (1) the costs

associated with having fragmented transportation processes, (2) multiple

organizational elements to implement these processes, (3) component

command organizational structure that requires duplicative administrative

support at multiple locations and maintenance of personnel in locations

where they may no longer be necessary to support intermodal

transportation processes. Fragmentation refers to the fact that no one

organization has responsibility for all aspects of traffic management or is

able to meet customers’ needs regardless of transportation mode. This

situation reflects the fact that management processes were developed

independently of each other. Although USTRANSCOM was established to

consolidate functions within one organization, because various

component commands retain modal responsibilities, fragmentation

remains, particularly with such areas as negotiating rates to move cargo,

shipment routing, documenting shipments for control and payment, and

customer billing.

Rate Negotiation Process

Divided Among Multiple

Units

The rate negotiation process is inefficient and not designed to facilitate

customer services. USTRANSCOM employs five separate systems and

strategies for negotiating rates, and each system reflects a particular

service’s approach to procurement. Accordingly, it can take as many as

five separate USTRANSCOM units to negotiate the rates for a single shipment.

Thus, a customer may need to contact five separate units to get all the

rates needed to move a single shipment. As a result, the customer often

experiences delays in getting needed services and may become interested

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in circumventing the system. Circumvention may be to the customer’s

immediate advantage but not advantageous to DOD overall. Moreover,

separate negotiation units add more people and costs to the system.

The following are various types of shipments and the units used for

negotiating the rates.

• For domestic continental United States (CONUS) freight shipments, and the

CONUS portion of international shipments not moving as part of a

through-intermodal move, MTMC’s Office of the Deputy Chief of Staff for

Operations, which has a staff of about 20 traffic management specialists,

negotiates for land transportation, inland waterway transportation, and

less-than-plane load air transportation with U.S. motor carriers, railroads,

freight forwarders, barge carriers, and air cargo companies.

• For international freight shipments, MSC’s Central Technical Activity,

Contracts and Business Directorate and its staff of 36, who are primarily

contracting specialists, negotiate for ocean transportation with ocean

carriers.

• For foreign transportation, MTMC’s overseas commands, such as

MTMC-Europe, Directorate of Inland Theater Transportation, negotiate for

land, inland waterway, and air rates, as required, in their areas of

responsibilities.

• For stevedore and terminal services, MTMC’s Office of the Principal

Assistant Responsible for Contracting, with a staff of seven contracting

specialists, negotiates contracts with port interests. Other units negotiate

for such services overseas.

• For personal property shipments, another part of MTMC’s Office of the

Deputy Chief of Staff for Operations, which has a staff of about 10 traffic

management specialists, negotiates household goods and unaccompanied

baggage freight rates for CONUS land and international water and air

transportation with through-bill-of-lading commercial moving van

companies and freight forwarders. MTMC’s overseas commands also

negotiate rates with overseas movers and forwarders for intratheater

personal property movement.

Shipment Routing Is

Separated Along Modal

Lines

Customers cannot go to one, single unit within USTRANSCOM to obtain

information on carriers and routing for all modes or for the movement of a

particular shipment through several modes. Instead, customers must deal

with multiple organizations and offices. To the customers, this adds time,

causes delays, and is inconvenient. Moreover, the fragmentation adds

more people to the organizational structure than needed.

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First, for domestic CONUS shipments, MTMC is responsible for providing

information to customers requiring routing advice. Generally, this

information is provided to installation transportation offices and others,

through the CONUS Freight Management system. This system is intended to

be a comprehensive freight management information system to

standardize and automate freight traffic management by providing the

capability to perform cost evaluations, select the best value carrier, and

perform prepayment audits of government bills of lading.1

Second, for international shipments, MTMC provides the routing in

consultation with MSC that has negotiated the movement contract. The

sealift cargo routing/booking and contract administration functions were

performed by MSC, but in October 1981, following the Harbridge House,

Inc., study, these functions were transferred to MTMC. MSC still retains

oversight over contractual provisions requiring certain minimum

allocation of cargo to other than the low-cost carriers on certain ocean

liner trade routes and over the statutory regulations governing the use or

nonuse of U.S.-flag ocean carriers.

Third, for personal property shipments, MTMC has routing systems separate

from its cargo routing systems to route shipments within CONUS and to and

from overseas locations.

AMC Aerial Port Operations also handles airlift shipment routing/carrier

selection. In the first quarter of fiscal year 1995, there were 89 positions in

these offices. The offices included four sections: the Cargo Management

Section, the Passenger and Traffic Management Section, the Passenger

Reservation Section, and the Air Transportation Traffic Negotiations

Section. The Cargo Management Section develops and implements policies

and procedures relative to the movement of cargo and mail to and from

AMC bases and other DOD activities, overseas and domestic, by AMC organic

and commercial contract aircraft. The Passenger and Traffic Management

Section directs and controls the AMC worldwide traffic management

program and passenger service system. The Passenger Reservation

Section develops, disseminates, and implements policy and procedural

guidance for establishment and operation of the worldwide AMC passenger

reservation system. The Air Transportation Traffic Negotiations Section

serves as the command point of contact with the commercial carriers to

move DOD passengers and specified cargo.

1

A bill of lading is the document transportation officers use to procure the required commercial freight

or personal property transportation. It is also used by MTMC and MSC to procure commercial ocean

transportation not covered by an MSC shipping agreement or contract.

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Documenting Shipments

for Control and Payment Is

Fragmented

Cargo documentation is a process long noted for its fragmentation.

Depending on the type of move and the component command managing it,

different types of documents are used. Multiple documents may be

necessary to move a single shipment, but it is often confusing to

customers and commercial carriers. By not using one standard system, or

not using documentation standard in the private sector, customers’ costs

are increased. Moreover, carriers often have to set up separate systems,

different from those used for their commercial business, just to service

DOD.

For domestic CONUS shipments, the documentation system is managed by

MTMC using government bills of lading. In fiscal year 1994, DOD moved more

than 1.2 million shipments, at a cost of nearly $600 million, under the

government bill of lading system.

The documentation system used for international shipments is a

combination of Military Standard Transportation and Movement

Procedures and the government bill of lading system. Most international

cargo shipments move under the Military Standard Transportation and

Movement Procedures system that uses DOD-unique documents, such as

the Transportation Control and Movement Documents and ocean cargo

manifests. Because this system is unique to DOD, commercial carriers must

set up a system only for DOD if they want its business. A portion of the

international cargo program, shipments moving to and from Hawaii,

Guam, and Puerto Rico, and shipments by foreign-flag carriers, uses the

government bill of lading system. In fiscal year 1994, DOD moved 7.5 million

measurement tons2

 of freight, at a cost of $735 million, using the Military

Standard Transportation and Movement Procedures system, and about

0.9 million measurement tons of cargo, at a cost of $106 million, using the

government bill of lading system.

For personal property shipments, both domestic and international, DOD

uses the government bill of lading system. The documentation system,

however, is separate from the cargo documentation system. In fiscal year

1994, DOD spent $540 million for international personal property

shipments.

Customer Billing Process

Is Also Fragmented

DOD has no single customer billing policy, procedure, or system for defense

transportation. Customers receive a bill from each component command

for each mode of transportation, rather than a single intermodal bill from

2

A measurement ton is a unit of volume, 40 cubic feet.

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only one component. Consequently, when a noncontainerized freight

shipment moves from some interior point in the United States to an

interior point overseas, a customer pays for the services USTRANSCOM has

provided in five parts. For example, for one shipment, a customer may

have one charge related to shipping cargo to the port of embarkation, a

second charge for MTMC’s port handling, a third charge for MSC’s ocean

service, a fourth charge for MTMC’s custom clearance and receipt of cargo

overseas, and a fifth charge for line-haul transportation overseas to final

point of destination. Separate billing systems are inefficient, adding people

and cost, and confusing to customers who pay for the inefficiencies.

The billing process for different shipments is as follows.

• For domestic CONUS shipments and shipments destined overseas but not

part of a through-container move, there is no reimbursement billing per se,

because the Defense Finance and Accounting Service pays the carriers’

charges citing the customers’ own appropriations. MTMC’s administrative

expenses related to these shipments are paid to MTMC in lump sum, not

shipment-by-shipment.

• For international shipments, customers reimburse MTMC and MSC for the

services. Customers have to pay MTMC twice, once for the booking and

documentation service at origin and again for clearing customs overseas

and managing the shipments through to final point of destination.

Customers also pay MSC for the ocean and related drayage or inland

line-haul services.

• For the overseas portion of an international shipment not part of a

through-container move, there is no reimbursement billing per se, because

the local theater finance office pays the carriers’ charges citing the

customers’ own appropriations.

• If the movement of cargo or passengers requires AMC organic or arranged

commercial airlift capability, customers reimburse AMC for the services.

Multiple

Organizational

Elements Also Drive

Costs Higher

Another major factor driving higher costs is the organizational structure.

The February 1995 USTRANSCOM DBOF budget justifications submitted to the

Congress show USTRANSCOM’s costs for fiscal year 1994 as $5.614 billion.

Table 3.1 shows a breakdown by component command.

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Table 3.1: USTRANSCOM Costs

Dollars in millions

Component command Fiscal year 1994 costs

MTMC $410

MSC 1,735

AMC 3,469

Total $5,614

The figures shown represent all costs, contracted transportation and port

handling/terminal services; expenses for salaries and wages, travel,

supplies, and equipment; contracted services, such as data processing;

payments to other federal agencies, such as the Defense Finance and

Accounting Service; maintenance to facilities; depreciation for capital

assets; expenses for the headquarters of USTRANSCOM; general and

administrative expenses; and overhead. In fiscal year 1994, USTRANSCOM

spent about $1.2 billion for salaries and wages of civilian and military

personnel.

Because there are three component commands, there are many instances

of staff performing work in the same functional area. We focused our work

on MTMC and MSC as examples because they basically have similar

organizational structures. However, as noted earlier in this chapter, AMC

also has staff performing transportation functions in areas similar to MTMC

and MSC, such as shipment routing and billing.

Current Organization The organizational charts for MTMC and MSC, with numbers of staff

authorized, are shown in appendix II. In summary, MTMC has

• 1 headquarters office;

• 1 field operating activity office;

• 3 subordinate command headquarters offices;

• 2 subordinate command, subcommand headquarters offices;

• 4 major port command offices;

• 14 medium port command offices;

• 6 port detachments;

• 1 river terminal;

• 1 outport;

• 4 ocean cargo clearance authority offices;

• 5 ocean cargo booking offices;

• 1 overseas inland theater transportation directorate;

• 2 privately owned vehicle processing centers;

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• 2 regional storage management offices; and

• 2 Army garrisons.

It has an authorized staff of 3,511, including 329 military personnel and

3,182 civilians.

MSC, for its strategic sealift, or DBOF-T, mission, has

• 1 headquarters office;

• 1 central technical activity office;

• 4 subordinate command headquarters offices;

• 3 subordinate command, subarea offices;

• 8 MSC port offices;

• 3 MSC detachment offices;

• 1 subordinate command representative office; and

• 4 MSC unit or Fast Sealift Squadron offices.

It has an authorized staff (DBOF-T only) of 362, including 69 military

personnel and 293 civilians.

Collocated Activities Many MTMC and MSC offices are located at the same site or in close

proximity to each other. Of the 25 MSC offices related to its DBOF-T mission

around the world, 24 are collocated, or in close proximity to MTMC offices.

Some of these offices are shown in table 3.2.

Table 3.2: Examples of Collocated or

Closely Located Offices

MTMC

MSC (staff numbers are the authorized

positions for the DBOF-T mission only)

Headquarters office in the Washington,

D.C., area, with a staff of 261.

A headquarters office in Washington, D.C.,

with a staff of 96.

A subordinate command office in Bayonne,

N.J., with a staff of 402.

A subordinate command office in

Bayonne, N.J., with a staff of 39.

A subordinate command office in Oakland,

Calif., with a staff of 295.

A subordinate command office in Oakland,

Calif., with a staff of 31.

A field operating office in Washington, D.C.,

and other locations with a staff of 611. a

A field operating office, called the Central

Technical Activity, in Washington, D.C.,

supporting all of MSC, with a staff of 51.

An European command office in the

Netherlands, with a staff of 85.

An European command office in the United

Kingdom, with a staff of 43.

A Pacific command office in Hawaii, with a

staff of 49.

MSC has a Pacific command office in

Japan, with a staff of 19.

aApproximately 390 are physically located in the Washington, D.C., area. The rest are located at

area command or other MTMC sites.

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Duplicative Staff Many administrative activities are duplicated between MTMC and MSC. Each

command has its own headquarters command, subordinate commands,

field operating agencies, and field offices with their own administrative

functions. Within these units, personnel are responsible for the same or

similar administrative functions. For example, each command has staff

assigned to carry out public affairs, internal review, and equal employment

opportunity matters. Each also has units responsible for legal matters,

resource management/comptroller, information management/computer

services, and plans.

Resource management and comptroller personnel are responsible for

developing and implementing policies, programs, and standards for using

manpower and for controlling the allocation and prioritization of

manpower resources. They also are responsible for (1) managing the

budgetary operations of the command, including preparing and executing

the budget and developing and defending the command’s DBOF and, where

applicable, appropriated fund budgets and (2) developing and publishing

ocean terminal port handling or ocean service billing rates, after obtaining

USTRANSCOM and Office of the Secretary of Defense approval. MTMC has

nearly 200 personnel in the resource management and comptroller areas.

MSC has 75 positions authorized for its DBOF-T mission for carrying out

resource management and/or/comptroller functions.

Information management and computer service personnel are responsible

for communications, automation, audio-visual, publications, and records

management, including the development, testing, and fielding of systems

that automate transportation functionality for the movement of deploying

units and freight. MTMC has over 400 personnel in the information

management and computer areas. MSC has 15 positions authorized for its

DBOF-T mission for carrying out information management and computer

service functions.

Plans personnel are responsible for the transportation planning necessary

to support the component commands’ missions related to strategic

mobility and contingency readiness. MTMC has about 100 personnel

involved in this area. MSC has about 25 positions authorized for its DBOF-T

mission for carrying out transportation planning functions.

Extensive MTMC Port

Operations and Terminal

Service

MTMC maintains an extensive worldwide port structure to service DOD

cargo that moves almost entirely through commercial channels. It operates

26 port and terminal facilities around the world, with more than 1,200

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staff, with a support cost, based on fiscal year 1994 data, exceeding

$70 million dollars (not including contract stevedore costs).

About 3 decades ago, all transportation moved modally, meaning that

transportation companies typically handled only a single mode of

transportation. Trucking firms or railroads handled land transportation,

steamship companies handled the ocean transportation, and air cargo

companies handled air movements. Today, a single transportation

company will pick up materials at the point of origin, truck them to a

seaport, ship them across the ocean, and truck them to the point of

destination, all as a single intermodal move.

Modal transportation required large numbers of personnel at points where

cargo was transferred from one mode of transportation to another. For

surface transportation (land and sea), intermodal transportation became

possible when standardized containers could be transferred between

modes without unpacking at transfer points. When the transportation

industry began moving cargo intermodally, it required fewer personnel to

transfer cargo between modes.

Today, the majority of cargo shipped by land and sea is moved

intermodally in standardized containers. When cargo moves intermodally,

containers are packed at the point of origin, moved by truck to the port of

embarkation, loaded on a ship, unloaded at the port of debarkation, moved

by truck to the point of destination, and unpacked. With intermodal

movements on land and sea, fewer personnel are needed at the ports for

warehousing, packaging, and loading than were required for modal

movements. For example, according to transportation studies, a container

port requires about 85 percent less labor than a noncontainerized

(breakbulk) port. The loading and unloading of containers on ships, rail

cars, and trucks are now achieved with large cranes that require much less

manpower than what was required to pack and unpack crates for

shipment.

MTMC still maintains a heavily staffed worldwide port infrastructure. The

work performed at the ports has changed from cargo handling activities to

various traffic management activities. The principal missions of MTMC units

at ports are to accomplish the expeditious movement and documentation

of DOD-sponsored cargo and privately owned vehicles through the military

and commercial terminals and piers in the command’s or unit’s area of

responsibility and, as assigned, cargo booking functions. Generally, these

units are organized substantially the same as they were more than a

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decade ago and reflect an era prior to containerization. Each has an office

of the commander, an administration division, and a combination of

divisions for cargo operations, cargo documentation, and traffic

management. This is little different from December 1979 when MTMC began

setting up its terminals in a standardized organization of no more than four

divisions to provide a more streamlined, better understood structure while

still preserving sufficient latitude to provide flexibility to meet local

conditions.

Staff are dispersed as follows:

• 461 located in U.S. East Coast facilities,

• 88 located in U.S. Gulf Coast facilities,

• 176 located in U.S. West Coast facilities,

• 42 located in Caribbean/Central America facilities,

• 244 located in European facilities, and

• 282 located in Far East facilities.

The facilities include 4 major port commands, 14 medium port commands,

6 port detachments, 1 outport, and 1 river terminal.

USTRANSCOM’s rationale for maintaining substantial numbers of personnel at

ports in cargo operations and traffic management when it ships most

cargo through the commercial transportation system, outside the military

ports, is not entirely clear. MTMC has recognized the implications of

containerization on the need for its worldwide port system. In 1975, the

Commander of MTMC was quoted as saying

“The Bayonne and Oakland terminals have been outmoded by transportation distribution

technology and are increasingly underutilized. The advent of containerization has had a

tremendous impact on DOD and commercial cargo transportation, with many commercial

facilities converting to or adding container handling equipment. In 1970, MTMC elected to

move DOD container cargo through commercial container facilities on the east and west

coasts, rather than install duplicate facilities at the Bayonne and Oakland terminals. The

commercial facilities can meet DOD contingency and support requirements.”3

The 1995 Defense Base Closure and Realignment Commission justified a

recommendation to close two MTMC terminal facilities—Military Ocean

Terminal, Bayonne, New Jersey; and the Oakland Army Base,

California—because the normal workload at these terminals did not justify

3

The Defense Transportation System: Competitor or Complement to the Private Sector?, Clinton H.

Whitehurst, Jr.

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continued military operation of the facilities and commercial ports could

handle military cargo requirements.

Table 3.3 shows the current number of MTMC port and terminal staff by unit

and location.

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Table 3.3: MTMC Port and Terminal Staff

Port/terminal unit

Office of the

Commander

Administrative

Division

Cargo

Operations

Division

Traffic

Management

Division Other Total

1301st Major Port

Command, Bayonne, N.J.

6 4 26 65 5 106

MTMC Port Detachment,

Baltimore, Md.

16 16

1303rd Major Port

Command, Southport,

N.C.

4 7 11 31 205a 258

1304th Major Port

Command, North

Charleston, S.C.

4 7 20 28 3 62

MTMC Port Detachment,

Cape Canaveral, Fla.

19 19

1314th Medium Port

Command, Beaumont,

Tex.

4 7 16 5 32

MTMC Port Detachment,

New Orleans, La.

28 28

1302nd Major Port

Command, Oakland,

Calif.

3 10 39 56 108

1312th Medium Port

Command, Compton,

Calif.

25 2 27

1313th Medium Port

Command, Seattle,

Wash.

4 6 14 20 44

MTMC Port Detachment,

Elmendorf Air Force

Base, Alaska

5 5

1322nd Medium Port

Command, Balboa,

Panama

2 5 16 7 30

MTMC Port Detachment,

Fort Buchanan, Puerto

Rico

12 12

1318th Medium Port

Command, BENELUX,

Rotterdam, Netherlands

4 14 21 39

MTMC Rhine River

Terminal, Mannheim,

Germany

5 12 7 24

(continued)

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Port/terminal unit

Office of the

Commander

Administrative

Division

Cargo

Operations

Division

Traffic

Management

Division Other Total

1325th Medium Port

Command,

Bremerhaven, Germany

4 14 20 30 32 100

1320th Medium Port

Command, Felixstowe,

United Kingdom

3 1 5 4 13

1321st Medium Port

Command, Livorno,

(Camp Darby), Italy

21 21

MTMC Outport, Lisbon,

Portugalb

1319th Medium Port

Command, Piraeus,

Greece

10 10

1323th Medium Port

Command, Izmir, Turkey

15 15

MTMC Port Detachment,

Iskenderun, Turkey

17 17

1324th Medium Port

Command, Azores

5 5

1315th Medium Port

Command, Okinawa,

Japan

6 18 15 30 15 84

1316th Medium Port

Command, Yokohama,

Japan

5 16 35 34 16 106

1317th Medium Port

Command, Pusan, Korea

4 9 28 39 12 92

Total 231 104 271 372 295 1,273

aPrimarily fire prevention, safety, security, engineering, supply, equipment operation, and

maintenance personnel.

bStaff numbers are not segregated but included with figures for the 1321st Medium Port

Command.

Additional Personnel at

MSC Port Sites Adds More

to Infrastructure Costs

MSC, as part of its DBOF-T mission, also maintains personnel at ports around

the world. It has 14 port-related offices with 50 positions authorized for its

DBOF-T missions. Costs for these offices are several million dollars

annually. (See table 3.4 for location of the positions.) Most of these offices

are maintained primarily for Navy fleet-related missions that are funded

directly by the Navy. The DBOF-T missions are secondary and include

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exercising local operational control of MSC-controlled ships in port and

maintaining liaison with service, local government, and commercial

activities concerned with MSC activities.

Table 3.4: MSC Port Facility Staff

Location

Number of

staffa

U.S. East Coast

MSC-Atlantic Representative, Southport, N.C. 1

MSC Detachment Office, MSC-Atlantic, Charleston, S.C. 3

MSC Office, Port Canaveral, Patrick Air Force Base, Fla. 2

U.S. Gulf Coast

MSC Unit, New Orleans, La. 7

U.S. West Coast

MSC Office, San Diego, Calif. 1

MSC Office, Seattle, Wash. 5

MSC Detachment Office, MSC-Pacific, Anchorage, Alaska 1

Central America

MSC Office, Balboa, Panama 4

Europe/Southwest Asia

MSC Office, BENELUX, Rotterdam, Netherlands 5

MSC Office, Southwest Asia, Manama, Bahrain 2

Far East

MSC Office, Okinawa, Okinawa, Japan 4

MSC Office, Korea, Pusan, Korea 8

MSC Detachment Office, MSC-Western Pacific, Singapore 1

MSC Unit, Diego Garcia 6

Total 50

aNumbers are the authorized positions for the DBOF-T mission only.

Mobilization Costs

Also Drive Defense

Transportation

Expenses Higher

Another factor driving costs higher is the need to maintain a

transportation mobilization capability. Although DOD policy mandates

direct appropriation funding for maintaining capability to expeditiously

respond to mobilization conditions and the services do use direct

appropriations to fund certain AMC and MTMC mobilization costs, other

mobilization costs are passed to customers.

As discussed earlier, MTMC operates an extensive port structure, supported

by more than 1,200 staff and costing over $70 million for salaries and

Page 33 GAO/NSIAD-96-60 Defense Transportation
Chapter 3 

Major Factors That Drive High Defense

Transportation Costs

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. Additionally, MSC, for some

high-volume shipping routes, uses other than the low-cost carrier to

maintain a mobilization capability. The costs of MTMC’s port structure and

MSC’s use of other than low-cost carriers are paid by the customers.

DOD Policy Is Not Clear

About Which Costs Should

Be Funded by Direct

Appropriations

While DOD’s policy and procedures for funding USTRANSCOM mobilization

capability are set forth in its Financial Management Regulation, this

guidance does not cover all situations in which USTRANSCOM components

charge their customers for costs that appear to be for mobilization

requirements. The existing guidance provides:

“4. United States Transportation Command (USTRANSCOM). Because a capability must be

maintained by the USTRANSCOM DBOF Transportation business area to expeditiously respond

to requirements to transport personnel, material, or other elements required to satisfy a

mobilization condition, direct appropriation funding will be provided for:

a. Air Mobility Command (AMC). Airlift flying hours and associated costs are based on the

requirement to maintain the capability of the airlift system, including crew training (and

concurrent mobilization) requirement. The airlift system training generated capacity is

used by DOD to move air eligible cargo and passengers. In order to extend air eligibility and

increase capacity utilization, rates are generally established to be competitive with

commercial carriers. However, resulting contributed revenue does not cover the costs of

operations due to the mobilization requirement. This requirement will be recorded/

budgeted as follows:

(1) . . . Military personnel within the Air Mobility Command will be direct funded by a

Military Personnel appropriation. Although the cost shall be recorded as a DBOF cost, it

shall be recorded so that it is not required to be recovered in customer rates.

(2) The balance of the mobilization requirement costs will be funded through a direct

appropriation to the Air Force and will be placed as an order with the DBOF. This will assure

that revenue is reflected to offset the costs.”

Accordingly, the Air Force uses appropriated funds to reimburse the

DBOF-T account an amount that it estimates will cover the difference

between a calculated competitive commercial rate total and the total costs

Page 34 GAO/NSIAD-96-60 Defense Transportation
Chapter 3 

Major Factors That Drive High Defense

Transportation Costs

AMC incurs in providing airlift. As a result, the amount reimbursed, which is

considered an Air Force readiness cost, is not passed on to defense

transportation system customers. In fiscal year 1994, the Air Force

reimbursed the DBOF-T account about $1.5 billion.

For MTMC, the guidance provides:

“b. Military Traffic Management Command (MTMC). The MTMC shall plan for and maintain a

Reserve Industrial Capacity (RIC) to transport personnel resources, material and other

elements required to satisfy a mobilization requirement. The costs of RIC will be funded by

Army Operation and Maintenance.”

Accordingly, the Army directly funded about $52 million for readiness in

fiscal year 1994, through the Reserve Industrial Capacity budget line item.

However, the Army did not clearly show what this funding was used for.

No specific guidance exists for Navy support of MSC. Yet, MSC charges

customers through its billing rates for what amounts to mobilization costs.

MSC contractually agrees to book some cargo to other than the low-cost

ocean carriers. It does this, in part, to maintain a sufficient number of

ships in the maritime mobilization base to meet the continuing

requirement to augment emergency sealift capacity. The additional costs

for using other than the low-cost carriers are paid for by the customers.

Conclusions Three factors drive USTRANSCOM defense transportation costs higher:

process fragmentation, organizational redundancy, and mobilization

requirements. In each of these areas, there are opportunities to improve

effectiveness and efficiency. As discussed in chapter 4, DOD and

USTRANSCOM are reengineering fragmented transportation business

processes, but they are delaying organizational structure change.

Recommendations relative to improvements in areas discussed in this

chapter are addressed in chapter 4 in the context of our overall

recommendations regarding reengineering the entire defense

transportation process.

Agency Comments

and Our Evaluation

DOD partially concurred with our findings. DOD acknowledged the impact of

defense transportation business processes and readiness/mobilization

costs on the charges DOD customers pay. It also agreed that MSC often uses

other than the low-cost carrier to meet its customers’ needs. DOD said that

this practice serves to maintain a mobilization capacity and ensure

Page 35 GAO/NSIAD-96-60 Defense Transportation
Chapter 3 

Major Factors That Drive High Defense

Transportation Costs

retention of more carriers, thereby fostering competition among the

carriers and resulting in lower costs to its customers.

DOD stated that the fragmented business processes and infrastructure will

be reviewed as part of its planned reengineering effort. DOD further stated

that as the processes are reengineered and the infrastructure assessed, a

joint, global, seamless, intermodal transportation system will emerge that

emphasizes origin to destination movement and visibility, supports

customer requirements, and is an integral part of the entire logistics

process. DOD also stated that another objective of the reengineering effort

is to separate the readiness/mobilization costs of providing peacetime

transportation so that customers will pay for peacetime costs only. We

agree with the stated goals of the reengineering effort and discuss it

further at the end of chapter 4.

Page 36 GAO/NSIAD-96-60 Defense Transportation
Chapter 4 

Reengineering Efforts Must Integrate

Long-standing Organizational Issues to

Achieve Optimum Results

Various studies, commissions, and task forces dating back as far as 1949

have recommended changes in the defense transportation system

organizational structure. Both USTRANSCOM and DOD have also recognized

the need for fundamental changes in defense transportation processes and

structures. However, over time, recommendations to change the structure

have not been implemented because several key players were reluctant to

allow change. Even after its designation as the single manager of defense

transportation, USTRANSCOM retained the same component command

structure that existed prior to its establishment. As recently as May 1995,

DOD initiated a task force to reengineer the defense transportation

processes, but that task force’s plan does not involve a review of

organizational structure until after DOD completes all other defense

transportation reengineering efforts. By delaying structural change, DOD

runs the risk of superimposing reengineered processes on a fragmented,

inefficient, and costly component command organizational structure.

Given the long-standing reluctance to change, it is unlikely that the

component commands would adopt any new processes that would

necessitate changes to that structure. It is essential that DOD consider

organizational structure as an integral part of its reengineering efforts if it

is to achieve the optimum results.

Need for Change

Recognized by DOD

Over the years, studies have recommended unifying traffic management in

one organization to improve defense transportation and reduce costs.

However, these recommendations were not implemented because of

opposition from component commands, services, the Joint Chiefs of Staff,

or the Congress. (App. III provides a history of attempts to realign defense

transportation.)

In 1992, the Commander-in-Chief, USTRANSCOM, stated before the House

Committee on Appropriations, Subcommittee on Defense, that moving

cargo in peacetime the same way they are moved during a contingency

would simplify the process. It would require no change in procedures to

“gear up” for a deployment, just an increase in the level of operations. He

added that the single manager assignments of the component

commands—MTMC, MSC, and AMC —would be integrated into USTRANSCOM,

making USTRANSCOM the single manager for all defense transportation.

Operations Desert Shield/Desert Storm deployment experience highlighted

the need for centralized transportation management as the most effective

and flexible way to manage and coordinate air, sea, and land movements,

while retaining the ability to react quickly to changing priorities and

Page 37 GAO/NSIAD-96-60 Defense Transportation
Chapter 4 

Reengineering Efforts Must Integrate

Long-standing Organizational Issues to

Achieve Optimum Results

efficiently schedule and employ transportation resources. Studies dating

back to 1949 also concluded that an integrated transportation system was

a critical element of an efficient and effective transportation system. In

1986, a Blue Ribbon Commission on Defense Management (the Packard

Commission) recommended establishing a single unified command to

integrate global air, land, and sea transportation. This recommendation

was acted upon with passage of the Goldwater-Nichols DOD Reorganization

Act of 1986, which ordered the Secretary of Defense to consider creation

of a unified transportation command, to include MTMC, MSC, and AMC. In

1987, the Secretary of Defense established the unified transportation

command—USTRANSCOM. However, USTRANSCOM retained the same

component command structure that existed prior to its establishment.

In 1994, a USTRANSCOM study, Reengineering the Defense Transportation

System, The “Ought to Be” Defense Transportation System for the Year

2010, concluded that more can and must be done to better integrate traffic

management and to provide more effective support, at lower cost, both in

peace and war. The study found that the defense transportation system

continued to be replete with redundant organizational structure and

inefficient and costly processes. As a result, USTRANSCOM and the Office of

Secretary of Defense are taking steps to reengineer the defense

transportation system. These efforts have concluded that a fundamental

restructuring of business practices and organizational structure is needed

for the defense transportation system to keep pace in a volatile and

resource-constrained operating environment. Both efforts include actions

to improve and consolidate fragmented processes such as procurement

and financial management. However, both efforts postpone any actions

related to organizational structure issues until after process changes are

completed. By delaying organizational structure change, DOD runs the risk

of superimposing reengineered processes on a fragmented, inefficient, and

costly component command organizational structure.

Past Reasons Not to

Change Structure Not Valid

Today

In response to a 1988 DOD Inspector General report recommendation to

eliminate transportation component command headquarters and to

transfer all defense transportation functions to USTRANSCOM, the command

cited three reasons for not implementing the recommendation. The

reasons cited were (1) by law, the services have the authority to train,

equip, and manage their assigned forces; (2) addition of the peacetime

mission to USTRANSCOM would detract from its primarily wartime mission;

and (3) removal of the services and their departments from the resource

Page 38 GAO/NSIAD-96-60 Defense Transportation
Chapter 4 

Reengineering Efforts Must Integrate

Long-standing Organizational Issues to

Achieve Optimum Results

allocation process would significantly complicate programming and

budgeting. These reasons for not reorganizing are not valid today.

First, although the services have the statutory responsibility to, among

other things, train, equip, and manage their assigned forces, the Secretary

of Defense is authorized under 10 U.S.C. 125(a) to transfer, reassign,

consolidate or abolish any function, duty or power not vested by law in an

official of DOD in order to provide more effective, efficient, and economical

operation of DOD. We are not aware of any provision of law that would

preclude the Secretary from exercising this authority to abolish the

transportation component command headquarters.

In addition, realigning defense transportation activities under USTRANSCOM

would be consistent with USTRANSCOM’s current mission. At the time of its

activation, USTRANSCOM was the single manager for defense transportation

during war. The service secretaries retained their single manager charters

over peacetime transportation functions. However, Desert Storm

highlighted the disadvantages of fragmentation between wartime and

peacetime transportation activities. Therefore, in 1992, DOD made

USTRANSCOM the single manager for defense transportation in both peace

and war.

Finally, since USTRANSCOM is the DOD financial manager for all defense

transportation through the DBOF, realigning defense transportation under

USTRANSCOM would create a more efficient resource allocation process.

Currently, each component command develops its own DBOF-T budget

submission. USTRANSCOM consolidates the separate budget submissions to

create a single DBOF-T budget submission. If defense transportation

activities were aligned under USTRANSCOM, there would be no need for each

component to develop a separate DBOF-T budget submission.

Conclusions The ongoing DOD and USTRANSCOM efforts to reengineer fragmented

transportation processes are a step in the right direction. However, these

efforts continue to delay organizational structure changes. Even these

current reengineering efforts run a significant risk of reengineering

processes to operate a fragmented and costly defense transportation

organization. In order for any defense transportation reengineering effort

to achieve the maximum improvement in processes and reduction in costs

possible, it must include as an integral part changes to organizational

structure.

Page 39 GAO/NSIAD-96-60 Defense Transportation
Chapter 4 

Reengineering Efforts Must Integrate

Long-standing Organizational Issues to

Achieve Optimum Results

Recommendations to

the Secretary of

Defense

We recommend that the Secretary ensure that the defense transportation

reengineering efforts simultaneously address process and organizational

structure improvements. Specifically, the reengineering efforts should

confront, at a minimum,

• need for separate traffic management component command headquarters

staff,

• consolidation of separate field subordinate command traffic management

staff, and

• elimination of all remaining duplicative field-based subordinate command

support staff.

We also recommend that the Secretary clarify which USTRANSCOM

mobilization costs should be passed along to its customers. The amounts

and purpose of any such costs should be contained in transportation

component annual financial statements and in the budget justification

statements submitted annually to the Congress.

Agency Comments

and Our Evaluation

DOD generally concurred with our findings and recommendations. It

indicated that it has already begun addressing our concerns and pursuing

the objectives of our recommendation related to business processes and

organizational improvements through its Reengineering Transportation

Action Plan, established at the direction of the Deputy Secretary of

Defense by memorandum of May 3, 1995. Under the plan, prepared on

June 30, 1995, DOD is establishing Integrated Product Process Teams,

comprised of representatives from the Military Services, Joint Staff,

Defense Logistics Agency, Under Secretary of Defense (Comptroller),

Under Secretary of Defense (Acquisition and Technology), Defense

Finance and Accounting Service, DOD Inspector General, and USTRANSCOM.

These teams are charged with developing a transportation vision,

reengineering transportation processes, reengineering transportation

financial management processes, and assessing the infrastructure required

to support the proposed reengineered processes. The first initiative,

developing a transportation vision, was completed on October 25, 1995.

DOD said that the organizational structure will be assessed in concert with

reengineering the business processes and the handling of

readiness/mobilization costs will be reviewed by the task force.

If the Reengineering Transportation Action Plan is carried out as

described and it results in a consolidated, global, seamless, intermodal

transportation system that eliminates and reduces infrastructure, thereby

Page 40 GAO/NSIAD-96-60 Defense Transportation
Chapter 4 

Reengineering Efforts Must Integrate

Long-standing Organizational Issues to

Achieve Optimum Results

lowering overall system costs and charges to DOD customers, it is

responsive to our concerns. As we noted earlier, however, many other DOD

efforts have had similar goals but the recommended changes to the

defense transportation organization were never implemented because key

defense transportation interests were reluctant to allow them to occur. In

the near future, we will be reviewing the results of the current

reengineering initiatives to see whether DOD is successful in implementing

necessary changes this time.

Page 41 GAO/NSIAD-96-60 Defense Transportation
Appendix I 

Comparison of Carrier Costs With Charges

to Customers

Table I.1: Shipment Examples Comparing Carrier Costs With Amounts Charged to USTRANSCOM Customers

A. Port-to-Port Shipment Cost Comparisons (no local drayage at origin or destination)

Example A.1

From: U.S. East Coast (any port in range)

To: Europe (any port in range)

Cost of low-rate carrier: $1,552.88 Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 112 percent

Example A.2

From: U.S. Gulf Coast (any port in range)

To: Europe (any port in range)

Cost of low-rate carrier: $1,552.88 Amount charged by USTRANSCOM: $3,616.98 (breakdown:

MSC: $2,545.85; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 133 percent

Example A.3

From: U.S. West Coast (any port in range)

To: Korea (any port in range)

Cost of low-rate carrier: $1,280.89 Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 198 percent

Example A.4

From: U.S. West Coast (any port in range)

To: Japan (any port in range)

Cost of low-rate carrier: $1,280.89 Amount charged by USTRANSCOM: $3,809.17 (breakdown:

MSC: $2,480.95; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 197 percent

Example A.5

From: U.S. West Coast (any port in range)

To: Okinawa (any port in range)

Cost of low-rate carrier: $2,024.29 Amount charged by USTRANSCOM: $3,632.17 (breakdown:

MSC: $2,303.95; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 79 percent

B. Port Area-to-Port Area Shipment Cost Comparisons (local drayage at origin and destination)

Example B.1

From: Military Ocean Terminal, Bayonne, N.J.

To: Bremerhaven, Germany

Cost of low-rate carrier: $1,712.18 Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 92 percent

(continued)

Page 42 GAO/NSIAD-96-60 Defense Transportation
Appendix I 

Comparison of Carrier Costs With Charges

to Customers

Example B.2

From: Military Ocean Terminal-Bay Area, Oakland, Calif.

To: Pusan, Korea

Cost of low-rate carrier: $1,267.32

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 201 percent

C. Port Area-to-Inland Point Shipment Cost Comparisons (local drayage at origin and line-haul transportation at destination)

Example C.1

From: Military Ocean Terminal, Bayonne, N.J.

To: Frankfurt, Germany

Cost of low-rate carrier: $2,152.91 Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 53 percent

Example C.2

From: Norfolk (Zone 2), Va.

To: Giessen, Germany

Cost of low-rate carrier: $2,361.18

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 39 percent

Example C.3

From: Military Ocean Terminal-Bay Area, Oakland, Calif.

To: Yokosuka, Japan

Cost of low-rate carrier: $1,607.16

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,809.17 (breakdown:

MSC: $2,480.95; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 137 percent

D. Inland Point-to-Port Area Shipment Cost Comparisons (line-haul transportation at origin and local drayage at destination)

Example D.1

From: Barstow, Calif.

To: Naha, Okinawa

Cost of low-rate carrier: $2,136.39

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,632.17 (breakdown:

MSC: $2,303.95; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 70 percent

(continued)

Page 43 GAO/NSIAD-96-60 Defense Transportation
Appendix I 

Comparison of Carrier Costs With Charges

to Customers

E. Inland Point-to-Inland Point Shipment Cost Comparisons (line-haul transportation at origin and

destination)

Example E.1

From: Mechanicsburg, Pa.

To: Frankfurt, Germany

Cost of low-rate carrier: $2,380.65

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 38 percent

Example E.2

From: Atlanta, Ga.

To: Kaiserslautern, Germany

Cost of low-rate carrier: $2,650.87

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,292.48 (breakdown:

MSC: $2,221.35; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 24 percent

Example E.3

From: Defense Distribution Depot Red River, (Texarkana), Tex.

To: Kaiserslautern Germany

Cost of low-rate carrier: $2,711.05 Amount charged by USTRANSCOM: $3,616.98 (breakdown:

MSC: $2,545.85; MTMC at origin: $557.89; MTMC at destination:

$513.24)

Percent by which total charges exceeded carrier costs: 33 percent

Example E.4

From: Lathrop, Calif.

To: Seoul, Korea

Cost of low-rate carrier: $1,723.39

(based on carrier’s single factor rate)

Amount charged by USTRANSCOM: $3,815.07 (breakdown:

MSC: $2,486.85; MTMC at origin: $573.87; MTMC at destination:

$754.35)

Percent by which total charges exceeded carrier costs: 121 percent

Page 44 GAO/NSIAD-96-60 Defense Transportation
Appendix II 

Component Command Organizations

Figure II.1: MTMC (authorized staff in parentheses)

Medium Port Commands


-Yokohama, Japan (106)


-Okinawa, Japan (84)


-Pusan, Korea (92)

OCCA/OCBO


-OCBO-Hawaii, Pearl


-OCCA, Yokohama,


-OCBO-Guam (2)

Harbor, Hawaii (3)


Japan (9)


Major Port Command


-Oakland, Calif. (108)

Medium Port Commands


-Compton, Calif. (25)


-Seattle, Wash. (38)


-Beaumont, Tex. (60)

Port Detachments


-New Orleans, La. (28)


-Elmendorf Air Force


OCBO


-Seattle, Wash. (6)

Vehicle Processing Centers


-St. Louis, Mo. (3)


-Dallas, Tex. (2)


RSMOs


-Topeka, Kans. (11)


-Oakland, Calif. (11)


Army Garrison


-Oakland, Calif. (103)


Base, Alaska (5)

Medium Port Commands


-Felixstowe, UK (13)


-Bremerhaven,


-Rotterdam,


-Livorno, Italy (18)


-Piraeus, Greece (10)


-Azores (5)


-Izmir, Turkey (15)


MTMC Terminal


-Mannheim, Germany (24)

Port Detachment


-Iskenderun, Turkey (17)


Outport


-Lisbon, Portugal (3)

OCCA/OCBO/ITTD


-OCBO-UK,


-OCCA-Europe


-OCCA-N Bremerhaven,


 Germany (16)


-OCCA-S Naples, Italy (7)


-OCBO-Saudi Arabia (2)


-ITTD, Stuttgart,


Germany (100)

Netherlands (39)

Germany (29)

Rotterdam, Netherlands (3)

Felixstowe, UK (2)

Major Port Commands


-Bayonne, N.J. (106)


-Southport, N.C. (258)


-Charleston, S.C. (62)


Medium Port Command


-Balboa, Panama (30)


Port Detachments


-Baltimore, Md. (16)


-Cape Canaveral, Fla. (19)


-Fort Buchanan,


RSMOs


-Bayonne, N.J. (13)


-Atlanta, Ga. (12)


Army Garrison


-Bayonne, N.J. (190) 

 Puerto Rico (12)


Headquarters


Falls Church, Va. (261)

Eastern Area-Bayonne,


N.J. (402)

Western Area-Oakland,


Calif. (295)

Transportation Engineering


Agency


Newport News, Va. (122)

MTMC-Pacific,


Wheeler Army Air Field,


Hawaii (49)

MTMC-Europe,


Rotterdam,


Netherlands (85)

Field Operating Activity,


Falls Church, Va. (611)

Source: MTMC.

Page 45 GAO/NSIAD-96-60 Defense Transportation
Appendix II 

Component Command Organizations

Figure II.2: MSC (authorized DBOF-T positions in parentheses)

Headquarters,


Washington, D.C. (96)

MSC, Atlantic,


Bayonne, N.J. (39)

MSC, Pacific,


Oakland, Calif. (31)

MSC, Europe,


London, U.K. (43)

MSC, Far East,


Yokohama, Japan (19)

Central Technical


Activity,


Washington, D.C. (51)

Subarea


-MSC, Mid-Atlantic,


Offices


-Port Canaveral,


-Balboa, Panama (4)


Detachment

-Charleston, S.C. (3)


Units/Offices


-MSC Unit, New


-Fast Sealift


-MSC Rep. Office,



Southport, N.C. (1)

Squadron One,


New Orleans, La.


(13)


Orleans, La. (7)

Norfolk, Va. (3)

Fla. (2)

Offices


-San Diego, Calif. (1)


-Seattle, Wash, (5)


Detachment


-Anchorage, Alaska


Unit


-MSC TAGOS

(1)

Unit Pacific,


Pearl Habor,


Hawaii (3)

Subarea

-MSC, Mediterranean,


Offices


-Rotterdam,


-Manama, Bahrain (2)

Naples, Italy (6)

Netherlands (5)

Subarea

-MSC, West Pacific,


Offices

-Okinawa, Japan (4)


-Pusan, Korea (8)


Detachment

-Singapore (1)


Unit

-Diego Garcia (6)

Guam (3)

Source: MSC.

Page 46 GAO/NSIAD-96-60 Defense Transportation
Appendix II 

Component Command Organizations

Figure II.3: AMC (authorized DBOF-T staff)

21st Air Force


McGuire AFB, N.J. (0)

Headquarters,


Scott AFB, Ill. (0)

Direct Reporting Units


and Field Operating


Agencies (378)

89 AW


Andrews AFB, Md.


(0)

19 ARW


Robins AFB, Ga.


(0)

436 AW


Dover AFB, Del.


(82)

319 ARW


Grand Forks AFB


N.D. (0)

437 AW


Charleston AFB, 


S.C. (64)

621 AMOG


McGuire AFB, N.J.


(0)

305 AMW


McGuire AFB, N.J.


(0)

621 AMSG


Ramstein AB,


Germany (76)

380 ARW


Plattsburg AFB,


N.Y. (0)

624 AMSG


Pope AFB, N.C.


(28)

640 AMSS


Howard AFB,


Panama (267)

82 Separate Units


with DBOF-T


Personnel

60 AMW


Travis AFB, Calif.


(75)

92 ARW


Fairchild AFB,


Wash. (0)

62 AW


McChord AFB,


Wash. (51)

375 AW


Scott AFB, Ill.


(0)

615 AMOG


Travis AFB, Calif.


(77)

22 ARW


McConnell AFB,


Kans. (0)

615 AMSG


Hickam AFB,


Hawaii (22)

43 ARG 


Malmstrom


AFB, Mont. (0)

60 Separate Units


with DBOF-T


Personnel

15th Air Force,


Travis AFB, Calif. (0)

722 ARW


March AFB,


Calif. (0)

Source: AMC.

Page 47 GAO/NSIAD-96-60 Defense Transportation
Appendix III 

History of Attempts to Realign Defense

Transportation

Proponent Date Action or recommendation

Department of Defense 1948 Created the Military Air Transport Service (later called the Military Airlift

Command), merging the Air Force’s Air Transport Command and the Navy’s

Naval Air Transport Service.

Commission on Organization of the

Executive Branch of the Government

(Hoover Commission)

1949 Concluded that government traffic management was inefficient and

recommended creation of a central traffic organization.

Department of Defense 1949 Created the Military Sea Transportation Service (later called MSC), combining

the ocean transport activities of the Army Transport Service and the Naval

Transportation Service.

Department of Defense 1950 Established the Military Traffic Service to unify traffic service for all of the

Department of Defense, but the service lacked authority to bring about

consolidation of the traffic functions of different segments of the Department.

Commission on Organization of the

Executive Branch of the Government

(Hoover Commission)

1955 Concluded that there was a continuing lack of Department of Defense

centralized cargo and passenger traffic management and identified many

duplicate defense facilities and services.

Department of Defense 1956 Designated the Secretary of Army as Single Manager for Traffic Management

within CONUS. Military Traffic Management Agency established to integrate

existing headquarters command and field traffic management agencies of the

Army, Navy, Air Force, and the Marine Corps.

Department of Defense 1961 Established the Defense Supply Agency under the direct authority of the

Secretary of Defense and placed the Military Traffic Management Agency

(renamed the Defense Traffic Management Service) under Agency control.

Department of Defense 1964 Returned the Defense Traffic Management Service (renamed the Military

Traffic Management and Terminal Service) to the Army, with the Secretary of

the Army designated Single Manager for Military Traffic, Land Transportation,

and Common-User Ocean Terminals.

Blue Ribbon Defense Panel 1970 Recommended creation of a logistics command to take over the Military Traffic

Management and Terminal Service and MSC traffic and terminal management

functions. New command would also include the Military Airlift Command.

Department of Defense 1971 Directed a merger of the Military Traffic Management and Terminal Service

and MSC into a joint Department of Defense Surface Transportation

Command, effectively moving sealift functions to the Army.

Department of Defense 1971 Following opposition by the Joint Chiefs of Staff (less the Army) and hearings

by a Special Transportation Subcommittee of the House Committee on Armed

Services, withdrew the merger proposal.

Department of Defense 1974 Renamed the Military Traffic Management and Terminal Service, MTMC, to

make it more identifiable with its mission.

Joint Chiefs of Staff (Steadman study) 1977 Examined options for consolidating defense surface transportation but

concluded that status quo should be maintained, effectively keeping the air,

land, and sea single managers independent under their respective services.

Surveys and Investigations staff of the

House Committee on Appropriations

1979 Recommended that a Defense Traffic Management Agency be established to

assume the traffic management responsibilities of MTMC and MSC.

Conference Report on the Department

of Defense Appropriation Act, 1980

1979 Directed the Department of Defense to develop an implementation plan to

consolidate MTMC and MSC and/or create a Defense Traffic Management

Agency.

(continued)

Page 48 GAO/NSIAD-96-60 Defense Transportation
Appendix III 

History of Attempts to Realign Defense

Transportation

Proponent Date Action or recommendation

Department of Defense 1979 Responded to congressional report by contracting with Harbridge House, Inc.,

to analyze the functional and organizational relationships of MTMC, MSC, and

to a limited degree, Military Airlift Command.

Harbridge House, Inc. 1980 Provided a report for the Department of Defense recommending establishment

of a Defense Traffic Management Agency or a Unified Traffic Management

Command comprised of MTMC and MSC.

Department of Defense 1981 Agreed to transfer MSC sealift cargo/passenger booking and related contract

functions to MTMC.

Joint Chiefs of Staff 1981 Agreed that management of surface movement system could best be

accomplished by integration of MTMC and MSC into a single command

reporting through Joint Chiefs of Staff to Secretary of Defense.

Department of Defense 1981 Set October 1982 as goal for completing integration of MTMC and MSC.

Report of the House Committee on

Appropriations, Department of Defense

Appropriations Act, 1982

1981 Endorsed plan to merge MTMC and MSC.

Joint Chiefs of Staff 1982 Recommended integration of MTMC and MSC into a unified Military

Transportation Command.

Department of the Navy 1982 Officials testifying before the House Committee on Armed Services indicated

that they were against the planned merger.

Department of Defense Authorization

Act, 1983

1982 Department of Defense was prohibited from taking any action to consolidate

MTMC and MSC.

Department of Defense 1983 The Congress rejected proposal by the Department of Defense in fiscal year

1984 authorization request to repeal language prohibiting consolidation of

transportation functions.

Department of Defense 1984 The Congress rejected proposal by the Department of Defense in fiscal year

1985 authorization request to repeal language prohibiting consolidation of

transportation functions.

Blue Ribbon Commission on Defense

Management (Packard Commission)

1986 Recommended establishment of a single unified command to integrate global

air, land, and sea transportation.

Goldwater-Nichols Department of

Defense Reorganization Act

1986 Ordered Secretary of Defense to consider creation of a unified command and

lifted prohibition against consolidation of traffic management functions.

Department of Defense 1987 Established USTRANSCOM with operational control of defense lift forces

assigned to MTMC, MSC, and Military Airlift Command during war,

contingencies, and exercises.

Department of Defense Inspector

General

1988 Released report recommending abolishing component command

headquarters and eliminating 1,015 component command headquarters level

positions.

Department of Defense 1988 Disagreed with Inspector General report.

(continued)

Page 49 GAO/NSIAD-96-60 Defense Transportation
Appendix III 

History of Attempts to Realign Defense

Transportation

Proponent Date Action or recommendation

USTRANSCOM reorganization task

force

1990 Recommended expanding USTRANSCOM mission to include time of peace,

as well as wartime. Developed charter establishing common-user lift

responsibilities, including consolidating traffic management and contracting

functions. Recommended establishment of a financial management office for

visibility over component command industrial funds.

Page 50 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Page 51 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Now on pp. 3-4 and

15-19.

Page 52 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Now on pp. 3-5 and

20-36.

Page 53 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Now on pp. 3-6 and

37-41.

Page 54 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Now on pp. 6 and 40.

Now on pp. 6 and 40.

Page 55 GAO/NSIAD-96-60 Defense Transportation
Appendix IV 

Comments From the Department of Defense

Page 56 GAO/NSIAD-96-60 Defense Transportation
Appendix V 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

David R. Warren, Director

James F. Wiggins, Associate Director

Nomi R. Taslitt, Assistant Director

J. Kenneth Brubaker, Evaluator

Nancy T. Lively, Evaluator

Suzanne K. Wren, Evaluator

Michelle F. Kidd, Evaluator

Robert E. Sanchez, Evaluator

Priscilla M. Harrison, Evaluator

Kansas City Regional

Office

John G. Wiethop, Evaluator-in-Charge

David J. Henry, Evaluator

Denice M. Millett, Evaluator

(709075) Page 57 GAO/NSIAD-96-60 Defense Transportation
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