GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Military Readiness, Committee on 

Armed Services, House of 

Representatives

December 1999 DEFENSE 

TRANSPORTATION

Process Reengineering 

Could Be Enhanced by 

Performance 

Measures

GAO/NSIAD-00-7

Page 1 GAO/NSIAD-00-7 Defense Transportation

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-283486 Leter

December 20, 1999

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness 

Committee on Armed Services

House of Representatives

Dear Mr. Chairman:

A number of studies since the late 1940s have cited the defense traffic 

management organizational structure as costly and inefficient. This 

structure consists of multiple transportation agencies each with separate 

service and modal responsibilities. In 1996, we reported that the 

fragmentation and duplication inherent to this structure led to higher 

transportation costs for defense customers, and recommended that the 

Department of Defense address the organizational structure as it 

reengineers the transportation processes to achieve the full benefits of the 

Department’s reengineering efforts.1

 In response, the Department stated it 

would implement several initiatives, including reengineering transportation 

financial management processes, and then it would assess the 

infrastructure required to support the reengineered processes. 

This report responds to your request concerning improving the efficiency 

and effectiveness of the defense transportation financial management 

processes. Specifically, our objectives were to determine (1) progress in 

reengineering defense transportation financial management processes,

(2) challenges associated with implementing these reengineered processes 

agencywide, and (3) the extent to which the Department is assessing the 

infrastructure required to support the reengineered processes. 

Results in Brief Progress has been made in reengineering defense transportation financial 

management processes through a reform initiative. The goal of this 

initiative is to reduce costs, eliminate government-unique documentation, 

reduce data requirements, improve accuracy, and adapt best commercial 

1 Defense Transportation: Streamlining of the U.S. Transportation Command Is Needed

(GAO/NSIAD-96-60, Feb. 22, 1996).
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practices. The Department has proposed two separate efforts to 

accomplish the initiative: (1) use an electronic payment system, referred to 

as PowerTrack, that would also eliminate the use of government-unique 

documentation and/or (2) use contractors (through contracting out to 

third-party logistics providers) to perform traffic management functions, 

including transportation payment, to achieve cost savings and other 

benefits. The electronic payment system facilitates the replacement of 

cumbersome government-unique documentation with simplified 

commercial documentation, and the Department has already begun using 

the electronic payment system at 69 military installations as of September 

1, 1999. The benefits of electronically paying and reconciling transportation 

bills include quicker carrier payment, reduced billing documentation, 

easier and more reliable reconciliation of billing disputes, reduced 

workload, and some savings from a reduction in the number of 

transactions processed by the Defense Finance and Accounting Service. 

Regarding the second effort, the Department plans to test whether the 

payment function, plus other transportation functions, can be contracted to 

a third-party logistics provider to reduce infrastructure and achieve cost 

efficiencies. Although the electronic payment system is being implemented 

now, the commercial contract initiative has not yet begun the prototype 

testing phase.

The Department faces challenges in implementing the electronic payment 

system agencywide. The most significant challenge will be the need to 

modify the system to accommodate the existing unique interagency billing 

process, which is plagued with data accuracy and reliability problems. In 

addition, transportation costs may increase because the electronic system 

imposes a fee on carriers that may be passed on to defense customers 

through higher transportation rates. The challenges associated with 

contracting out transportation functions have not yet been identified, but 

agency officials have acknowledged the need to determine if a commercial 

contract with a third-party logistics provider can meet Department 

contingency and surge requirements. 
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While the Department has addressed the infrastructure required to support 

the reengineered financial management processes for the PowerTrack 

effort, it could not estimate the infrastructure reductions for the 

contracting out effort because, according to Department officials, such 

reductions cannot be estimated until completion of the prototype testing. 

We are concerned, however, that the Department has no plans to 

comparatively assess the cost and benefits of the two approaches to 

determine whether PowerTrack or the third-party logistics provider could 

more effectively achieve its goals, such as reducing costs and improving 

quality, in reengineering the transportation financial management 

processes. Finally, although DOD’s Government Performance and Results 

Act of 1993 (Results Act)2

 Performance Plan for fiscal year 2000 identifies 

general goals for its financial management initiative, there are no specific 

savings targets or overall performance-oriented measures that relate to 

such things as cost reductions and other improvements. We are 

recommending that the Department comparatively assess the cost and 

benefits of the two approaches and include in future Results Act 

Performance Plans performance-oriented measures and specific savings 

targets so that it can measure the success of the reform efforts.

Background The major defense transportation reengineering initiative is being 

implemented under Management Reform Memorandum 15. This 

memorandum, issued by the Deputy Secretary of Defense on July 7, 1997, 

directs the complete reengineering of defense transportation 

documentation and financial processes. The reengineering initiative has 

been incorporated in the Department of Defense’s (DOD) Defense Reform 

Initiatives, which are a series of initiatives designed to achieve a revolution 

in DOD’s business and support operations by identifying and adopting the 

best business practices from the private sector. This effort is being 

managed by the Office of the Assistant Deputy Under Secretary of Defense 

for Transportation Policy. The defense transportation reengineering 

initiatives’ key objectives are to reduce infrastructure costs, eliminate 

government-unique documentation and processes, reduce data 

requirements and improve accuracy, increase use of electronic commerce, 

2 The Results Act requires federal agencies (including DOD) to set strategic goals, measure 

performance, and report on the degree to which goals were met. Its intent is to focus 

agencies more on results, service delivery, and program outcomes. This is expected to 

provide the Congress and other decisionmakers with objective information on the relative 

effectiveness and efficiency of federal programs.
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and employ best commercial practices. To meet its objectives, DOD 

officials proposed using commercial documentation and credit cards as the 

cornerstones of the financial management reengineering initiative and 

conducted short-term pilot tests of these features. In February 1998, DOD 

concluded that the pilot tests produced favorable results. They 

recommended that, because of the tests’ limited scope and use of manual 

procedures, the concepts be prototyped in the airlift, sealift, and express 

delivery business areas. The information from the prototypes would be 

used to address concerns before agencywide implementation. 

The Department established four prototype tests to continue evaluating the 

use of commercial documentation and credit cards. The airlift prototype 

test, begun in July 1998, used credit cards for interagency billings, 

expanding on the earlier pilot tests. The sealift prototype, begun in 

September 1998, was designed to broaden the scope of the pilot test and 

automate the processes that had been administered manually. Key 

processes tested included use of credit cards for both commercial carrier 

and interagency payments and use of simplified commercial 

documentation. The surface and express prototypes began in April 1998. 

This testing was broader in scope than the pilot test, involving the Army, 

the Air Force, the Navy, and the Marine Corps as well as a number of 

depots. The initial service prototypes primarily tested the use of credit 

cards, while the Defense Logistics Agency and a few service sites tested the 

use of the “PowerTrack” electronic payment and reconciliation system. 

PowerTrack is a commercially owned online database accessible via the 

Internet, Electronic Data Interchange, and telephone. All shipment 

information is submitted electronically to PowerTrack and stored in its 

central database. Both DOD and carriers have access to the database for 

instant approval and payment of invoices and for online payment dispute 

resolution. The goal is to pay carriers within 3 days using PowerTrack 

versus 30 to 90 days under the existing systems.

In February 1999, the Deputy Secretary of Defense directed the DOD-wide 

implementation of the defense transportation financial management 

reform initiative. Specifically, he directed the elimination of governmentunique documentation, such as government bills of lading; the use of 

PowerTrack for commercial transportation payment, certification, and 

reconciliation; and the development of PowerTrack for interagency billing. 

DOD also decided to conduct a 1-year regional prototype test of the use of a 

contractor (third-party logistics provider), to provide domestic freight 

transportation services, including financial management and payment 
B-283486

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functions, in a selected geographic area. The test is planned to begin in mid 

calendar year 2000. 

DOD estimated total investment costs for both of its defense transportation 

reengineering initiatives of about $41.4 million for fiscal years 1997 through 

2000. This amount included $8.4 million for the pilot and prototype efforts, 

$25 million for Defense Logistics Agency and service system hardware and 

software changes, $5.9 million for contractor support, and $2.1 million for 

an administrative office to implement PowerTrack.

Progress Made in 

Implementing Reforms

DOD has made progress in reforming its transportation system through 

initiatives planned or under way to reengineer its financial management 

processes. Specifically, DOD is implementing the PowerTrack electronic 

payment and reconciliation system agencywide. In conjunction with 

PowerTrack, DOD is also using commercial documentation, thereby 

reducing or eliminating cumbersome government-unique documents. In 

addition, DOD is planning to test the use of a third-party logistics 

contractor to perform in-house transportation functions to determine 

whether cost savings and other benefits can be achieved. 

DOD was using the PowerTrack system at 69 installations as of September 

1, 1999. The system has shown that it has the capability of providing 

quicker payments to carriers and can help to resolve billing disputes more 

quickly. On delivery of a shipment, PowerTrack can pay a carrier 

automatically within 3 days if the carrier’s electronic bill matches the 

expected service cost. Under the old system, carrier payment could take as 

long as 60 to 90 days. If the bill and cost of service amounts do not match 

(for example, when the shipment weight varies or delivery requirements 

are changed), PowerTrack allows for on-line reconciliation, essentially 

through the use of e-mail within the PowerTrack system. Some carriers 

believe that PowerTrack will ultimately enable them to reduce staff, 

particularly staff currently involved in handling government bills of lading. 

Most importantly, PowerTrack enables transportation officers to verify 

receipt of the shipment prior to authorizing payment to the carrier. This 

feature is a significant improvement over the current system. 

As part of the reform efforts and implementation of PowerTrack, DOD has 

eliminated some government-unique documentation and is using 

commercial transportation documentation. For example, the Department is 

eliminating requirements for the government bill of lading for U.S. cargo 

and replacing them with simplified commercial documents. DOD estimates 
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it will eliminate about 1 million government bills of lading, which carrier 

and defense and industry officials have told us are extremely time 

consuming to create, process, and store.

The planned initiative to contract out some transportation functions may 

also demonstrate potential cost benefits. Beginning in mid 2000, DOD plans 

to conduct a 1-year prototype test of the use of an outside contractor to 

perform transportation functions, including documentation and payment 

functions. A March 1998 report prepared by Coopers & Lybrand for DOD 

discusses the use of a contractor to support reengineering of the 

transportation financial management processes. Specifically, the report 

entitled, Report of the Department of Defense Reengineering Task Force: 

Reengineering Transportation Documentation and Financial Processes, 

Best Commercial Practices, cites the benefits of using commercial 

companies to perform some in-house transportation services because it 

would be cost-effective as well as responsive to DOD’s transportation 

requirements. The report notes that any evaluation of using a third-party 

logistics provider to perform in-house transportation functions, however, 

would require a thorough analysis of a contractor’s capability to satisfy 

contingency requirements. 

Challenges in 

Implementing the 

PowerTrack Electronic 

Payment and 

Reconciliation System

In moving forward with agencywide PowerTrack implementation, DOD is 

working to resolve many issues. PowerTrack can provide substantial 

benefits. However, DOD faces challenges in modifying PowerTrack to 

operate with DOD systems. In particular, they need to develop a way to 

accommodate the existing unique interagency billing and payment process 

for the airlift and sealift business areas. Further, the interagency billing and 

payment process is plagued with data accuracy and reliability problems. In 

addition, PowerTrack is not widely used in the commercial transportation 

industry, and some carriers are concerned about the impact of the carrier 

fee in the low-profit margin freight business. These carriers believe the use 

of PowerTrack could ultimately result in increased freight rates to DOD. 

Further Tests to Resolve 

Issues Related to 

Interagency Billing Are 

Planned

The Department faces challenges in implementing PowerTrack in its 

interagency billing and payment process. DOD did not test PowerTrack in 

accomplishing this process, and the PowerTrack system must be modified 

to accommodate it. Implementing PowerTrack with the existing 

interagency billing system will be a difficult process because, as we 

reported previously, the DOD shipper is often billed by many defense 

agencies for reimbursement of a single shipment. Further, customers are 
B-283486

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often billed without adequate supporting data so they have difficulty 

determining if they have been billed accurately. Additional testing of using 

PowerTrack to make interagency payments is planned before proceeding 

with full implementation of this process. Prototyping PowerTrack for 

sealift interagency payments began in September, and the airlift 

interagency prototype began in November 1999.

In addition, current plans to use PowerTrack for interagency billing and 

payment will encounter an interagency reimbursement system that is 

plagued with data accuracy and reliability problems. PowerTrack cannot 

correct the systemic data accuracy and reliability problems in existing 

systems and requires accurate input data for automatic reconciliation. 

However, agency officials believe that PowerTrack, with its feedback and 

correction capabilities, may provide a means to help address some of the 

systemic data problems. According to agency officials, PowerTrack will 

need modifications in order to work with the interagency reimbursement 

process.

PowerTrack Is Not Widely 

Used in the Transportation 

Industry

PowerTrack is not widely used by commercial companies and has only 

been available since April 1998. Electronic Data Interchange, which does 

not require that carriers pay a fee as PowerTrack does, is widely used in 

industry, and it is also used by the Defense Finance and Accounting Service 

with many of DOD’s largest carriers. Electronic Data Interchange is the 

business-to-business electronic exchange of documents using standard 

formats that are widely recognized both nationally and internationally. The 

use of standard data formats allows organizations to exchange common 

business documents without having to customize their hardware or 

software for each organization they do business with. Some large carriers, 

who have made substantial investments in systems and equipment in order 

to use Electronic Data Interchange, have expressed satisfaction with it and 

are less inclined to favor PowerTrack. For example, one large carrier 

representative told us that his company is already getting paid in 7 days 

with Electronic Data Interchange and electronic payment under the current 

system, and he does not see enough advantage to using PowerTrack to get 

payment in as few as 3 days. However, many small carriers have not made 

investments in Electronic Data Interchange technology; a Defense Finance 

and Accounting Service official stated that he believes PowerTrack will be 

a less costly alternative for them. Although PowerTrack offers carriers the 

ability to use Electronic Data Interchange, carriers do not need substantial 

investments in associated technology to use the PowerTrack system. 

Further, DOD has had only limited experience with PowerTrack, having 
B-283486

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first started prototype testing with the system in April 1998. DOD does not 

expect to complete agencywide implementation of PowerTrack until 

September 2000.

Transportation Costs May 

Increase Because of Carrier 

Fees

PowerTrack fees could result in higher transportation costs for DOD 

shippers at military installations that use defense transportation services. 

PowerTrack charges carriers a transaction fee, similar to credit card fees in 

the commercial world. Carrier fees generally range from about 1 to 2 

percent of the transaction amount, gradually decreasing to the minimum

1 percent as the transaction amount increases. Other than start-up and 

modification costs, the government will not incur transaction fees or other 

PowerTrack costs. However, transportation costs could increase if carriers 

pass the PowerTrack fee to defense shippers in the form of higher-priced 

negotiated freight contracts.

Some carriers oppose the PowerTrack transaction fees and DOD’s plan to 

make participation in PowerTrack mandatory in order to bid for future 

freight business. While some carriers believe quicker payments justify the 

carrier fee, others believe the time value of money does not offset the fee. 

Moreover, some carriers are concerned about the negative impact of the 

fee in their low margin businesses: the American Trucking Association, for 

example, has expressed concerns about the PowerTrack fee and its cost 

impact on member trucking firms. 
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Overall Results of the 

Reform Efforts Need to 

Be Measured

The Department has not addressed how it would comparatively assess the 

cost and benefits of the two efforts−using PowerTrack and/or a third-party 

logistics provider−to achieve its goals, particularly in terms of reducing 

costs and infrastructure. While the Department has addressed the 

infrastructure required to support the reengineered financial management 

processes for the PowerTrack effort, such reductions, according to 

Department officials, cannot be determined for using a contractor to 

provide transportation functions until prototype testing is completed. 

However, as noted previously in this report, a recent study cites potential 

cost and efficiency benefits from doing so. In addition, as we reported in 

1996, process fragmentation, duplication, and organizational overlap are 

major factors driving up defense transportation costs. For example, as 

many as five separate units’ actions within two component commands may 

be required to handle a single overseas shipment. These separate 

organizations require separate staffs and separate supporting 

infrastructures, the costs of which are ultimately included in customer 

charges. We noted that waiting to address long-standing organizational 

issues until process improvements are made would likely represent a 

significant barrier to achieving the full benefits of reengineering efforts.3

Three-quarters of the estimated $11.2 million annual savings resulting from 

PowerTrack implementation is expected to be derived from a significant 

reduction in the number of transactions processed by the Defense Finance 

and Accounting Service and a concomitant reduction in revenue since it 

charges a fee for each transaction. Although the Defense Finance and 

Accounting Service has identified 250 positions that could be eliminated 

under PowerTrack implementation, it cannot eliminate the transportation 

payment function at the Finance and Accounting Service because it also 

handles household goods payments that are not covered under the 

PowerTrack electronic system. 

DOD has not identified the potential organizational implications of the 

contracting out effort or projected any infrastructure reductions that could 

result from this effort. DOD officials told us they must wait for the 

prototype test of the contract concept that is scheduled to begin in mid 

2000 and be completed 1 year later. DOD officials told us they cannot wait 

to complete the prototype for contracting transportation functions before 

3 Defense Transportation: Streamlining of the U.S. Transportation Command Is Needed

(GAO/NSIAD-96-60, Feb. 22, 1996).
B-283486

Page 10 GAO/NSIAD-00-7 Defense Transportation

proceeding with the electronic system. They point out that the two efforts 

are not mutually exclusive, and they would like to use PowerTrack in 

conjunction with contracting out.

Reform Effort Lacks 

Quantitative Performance 

Measures in the Results Act 

Performance Plan

Although DOD has established general goals for its financial management 

initiative, it has not identified specific savings targets or expected 

outcomes for the initiative for its fiscal year 2000 Government Performance 

and Results Act Performance Plan. The Results Act requires agencies to 

establish annual performance plans and include performance goals 

defining the level of performance to be achieved by a program activity. The 

Results Act further requires agencies to establish performance indicators 

to measure or assess the outcomes of each program activity and provide a 

basis for comparing actual program results with the established 

performance goals. DOD’s fiscal year 2000 performance plan provides a 

qualitative performance indicator for its defense transportation financial 

management initiative and cites the goals of increasing transportation 

efficiency and reducing infrastructure costs. The plan outlines broad 

strategies for accomplishing these goals, but does not provide quantitative 

measures by which to judge the relative success of the initiative in reducing 

infrastructure costs and improving operating efficiencies. For example, 

although DOD cites “reducing data requirements” as a strategy for 

achieving its broad goals, it does not provide a quantitative indicator or 

target by which to measure the success of this effort in reducing costs and 

improving efficiencies. 

Conclusions The Department of Defense has made progress in reforming the defense 

transportation system. We support these ongoing efforts to reengineer 

costly processes. However, we are concerned that the Department has no 

plans to comparatively assess the costs and benefits of reengineering 

transportation financial management processes through PowerTrack or 

through contracting to a third-party logistics provider. Finally, the 

Department has not included its savings targets or expected performance 

outcomes in its fiscal year 2000 Results Act Performance Plan. 

Recommendations We recommend that the Secretary of Defense comparatively assess the cost 

and benefits of using PowerTrack or contracting out the function to a thirdparty logistics provider to reengineer the transportation financial 

management process. In addition, we recommend that the Secretary of 
B-283486

Page 11 GAO/NSIAD-00-7 Defense Transportation

Defense include the specific savings targets and overall performanceoriented measures in future Results Act Performance Plans to enable a 

clear assessment and comparison of the extent to which these or other 

efforts could achieve the goals of the transportation reform initiative.

Agency Comments and 

Our Evaluation

The Department of Defense provided comments on a draft of this report 

(see app. I). The Department disagreed with the draft report 

recommendations because it believes it (1) has already addressed 

infrastructure reductions to the extent possible and (2) is using metrics to 

measure the success of the reform efforts. 

As we discussed in our draft report, we agree that the Department has cited 

cost reductions resulting from reengineering its transportation financial 

management processes for the PowerTrack effort. Also, as noted in the 

draft report, DOD believes it is premature to estimate savings from the use 

of a third−party logistics provider until prototype testing is completed. The 

intent of our recommendation was for DOD to comparatively assess the 

cost and benefits of the two approaches—using PowerTrack and/or a thirdparty logistics provider—to determine the best approach for improving the 

process and achieving cost reductions. Accordingly, we clarified our final 

recommendation to reflect that position.

With respect to our recommendation to develop performance measures 

with quantifiable goals, the Department stated that it has developed several 

key metrics to measure success of its electronic payment initiative. In 

response, DOD provided information on metrics it is using for PowerTrack 

and other metrics it is planning to develop for the third-party logistics 

effort. While we agree that the Department has identified metrics, or is in 

the process of developing them, our concern is that the measures are not 

linked to the overall reform initiative and are not included in the Results 

Act Performance Plans. For example, to a make a comparison between 

PowerTrack and the contractor initiative, performance-oriented measures 

related to the overall initiative, such as cost reductions and service 

improvements to DOD customers, are needed. As we stated in the report, 

the current (fiscal year 2000) performance plan contains no specific goals 

and does not refer to any metrics. Including performance indicators in 

future years performance plans would help to provide a means to measure 

the success of reforming the transportation financial management process. 

We clarified our recommendation in this regard.
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DOD also provided some technical comments that we have incorporated as 

appropriate.

Scope and 

Methodology

To determine DOD’s progress and challenges in implementing the defense 

transportation reengineering initiatives and to determine if DOD is 

assessing the infrastructure necessary to support the reengineered 

processes, we obtained and reviewed relevant DOD documents and 

contractor reports. In addition, we interviewed cognizant officials at the 

Office of the Assistant Deputy Under Secretary of Defense for 

Transportation Policy, Washington, D.C. We also obtained relevant 

information and interviewed officials at the Defense Logistics Agency 

Headquarters, Fort Belvoir, Virginia; Defense Distribution Center 

Headquarters, New Cumberland, Pennsylvania; U.S. Transportation 

Command, Scott Air Force Base, Illinois—and from two component 

commands—the Air Mobility Command and the Military Traffic 

Management Command. To obtain additional information on potential 

savings, we interviewed officials at the Defense Finance and Accounting 

Service located in Arlington, Virginia.

To obtain industry perspective on the defense transportation reengineering 

initiatives, we interviewed various defense transportation system 

commercial cargo carriers, including representatives of six motor carrier 

and two ocean carrier companies. We also interviewed officials of three 

third-party logistics companies. 

We conducted our review from August 1998 through November 1999 in 

accordance with generally accepted government auditing standards.

We are sending copies of this report to the Honorable William S. Cohen, 

Secretary of Defense; General Charles T. Robertson, Jr., Commander in 

Chief of the U.S. Transportation Command; the Honorable Louis Caldera, 

Secretary of the Army; the Honorable Richard J. Danzig, Secretary of the 

Navy; the Honorable F. Whitten Peters, Secretary of the Air Force; the 

Honorable Jacob J. Lew, Director, Office of Management and Budget; and 

other interested congressional committees. 
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If you have any questions regarding this letter, please contact me at

(202) 512-8412. Major contributors to this report are Nomi Taslitt, Greg 

Symons, Nora Landgraf, and John Wiethop.

Sincerely yours, 

David R. Warren, Director

Defense Management Issues
Page 14 GAO/NSIAD-00-7 Defense Transportation

Appendix I

Comments From the Department of Defense ApendxIi

Note: GAO comments 

supplementing those in the 

report text appear at the

end of this appendix.
Appendix I

Comments From the Department of Defense

Page 15 GAO/NSIAD-00-7 Defense Transportation

See comment 1.

See comment 2.

Now on p. 10.
Appendix I

Comments From the Department of Defense

Page 16 GAO/NSIAD-00-7 Defense Transportation

See comment 3.

See comment 4.

See comment 5.

Now on pp. 10-11.
Appendix I

Comments From the Department of Defense

Page 17 GAO/NSIAD-00-7 Defense Transportation
Appendix I

Comments From the Department of Defense

Page 18 GAO/NSIAD-00-7 Defense Transportation

The following are GAO’s comments on the Department of Defense’s (DOD) 

letter dated October 25, 1999.

GAO Comments 1. We acknowledge in the report that DOD believes it is premature to 

determine the extent that the use of contracting out can reduce DOD 

infrastructure until it is determined whether contracting out can meet its 

requirements. However, the goal setting process can still continue. DOD 

does not have a sound basis for assessing how well third-party logistics 

providers will or will not meet its needs unless it can set infrastructure 

reduction goals prior to implementing the prototype testing effort. As 

stated in the report, a prior DOD study indicates substantial infrastructure 

savings associated with contracting out some transportation functions. 

2. The Department stated that it had identified $11.2 million in 

infrastructure savings using the electronic payment system, referred to as 

PowerTrack in our report. About $8.2 million of the $11.2 million that DOD 

cites in estimated savings is based on Finance Service transaction billings, 

not on actual reductions of infrastructure or personnel. Although DOD 

notes that the Finance Service is adjusting its infrastructure to meet 

changes in workload as PowerTrack is being implemented, no substantial 

personnel reductions have yet occurred. As our report notes, Finance 

Service personnel cannot be totally eliminated until the household goods 

portion of transportation payment is reengineered or included under the 

PowerTrack electronic system. Further, unless the Finance Service actually 

eliminates personnel, the infrastructure savings will not accrue, and 

billings for the remaining services could potentially increase. 

3. DOD notes in its response that the remaining $3 million of the

$11.2 million in estimated savings is contingent on the successful 

completion of the interagency prototypes, further stating that 

infrastructure adjustments will be made when PowerTrack is implemented 

in these business areas. However, implementation of PowerTrack in the 

interagency process has not yet been determined; therefore, the associated 

infrastructure reductions may or may not occur. The interagency portion of 

PowerTrack, as noted in the report, is a major challenge to successful 

implementation of the reengineered system. 

4. Regarding DOD’s comment that the transportation payment process is 

not a primary focus of the test to evaluate the use of contracting out some 

transportation functions, our point is that many third-party logistics 

providers already offer payment and reconciliation services. While DOD 
Appendix I

Comments From the Department of Defense

Page 19 GAO/NSIAD-00-7 Defense Transportation

identified possible savings through the electronic system, the opportunity 

for potentially greater savings and elimination of unnecessary 

infrastructure may be possible through the contracting effort. However, 

absent this type of comparative analysis, DOD will not have the 

opportunity to compare the two types of approaches to reengineer the 

transportation payment function. 

5. DOD added that, even if the prototype is successful, the use of thirdparty logistics providers to perform the transportation payment and other 

functions will be applicable to only a segment of the domestic surface 

freight movement business because outside contractors do not normally 

handle some types of cargo routinely moved by DOD, which include 

munitions, bulk fuels, and oversize shipments. While we recognize that 

contracting out may not be appropriate for some shipments, it need not be 

overly restrictive during the prototype effort and should allow for testing 

the full range of capabilities of third-party logistics providers. Moreover, 

DOD states that it plans to use PowerTrack in the third-party logistics 

process and does not consider the payment function a primary focus of that 

effort. By doing so, we believe DOD is missing an opportunity to 

comparatively assess the potential benefits and cost reductions that may be 

achieved by contracting out the transportation payment and reconciliation 

process. In addition, it should be noted that DOD has included both 

initiatives under its reform effort to reengineer the transportation financial 

management processes. 

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