In September 1993, the National Performance Review recommended an overhaul of DOD’s temporary duty (TDY) travel system. In response, DOD created the DOD Task Force to Reengineer Travel to examine the travel process. The task force found that the current process was expensive to administer and was neither customer nor mission oriented with the net result being a travel process that was costly, inefficient, fragmented, and did not support DOD’s needs. On December 13, 1995, the Under Secretary of Defense for Acquisition and Technology and the Under Secretary of Defense (Comptroller)/Chief Financial Officer issued a memorandum, “Reengineering Travel Initiative,” establishing the PMO-DTS to acquire travel services that would be used DOD-wide. Additionally, in a 1997 report to Congress, the DOD Comptroller pointed out that the existing DOD TDY travel system was never designed to be an integrated system. The report stated that because there was no centralized focus on the department’s travel practices, the travel policies were issued by different offices and the process had become fragmented and “stovepiped.” The report further noted that there was no vehicle in the current structure to overcome these deficiencies, as no one individual within the department had specific responsibility for management control of DOD TDY travel. DOD management and oversight of the DTS program has varied over the years. DTS was designated a “Special Interest” program in 1995. It retained this status until May 2002 when it was designated a major automated information system, with the Defense Finance and Accounting Service (DFAS) being designated as the lead component for the program. This meant that DFAS was responsible for the management oversight of DTS program acquisition, including DTS compliance with the required DOD acquisition guidance. In September 2003, DOD finalized its economic analysis for DTS in preparation for a milestone decision review. The highlights of the economic analysis are shown in table 1. In December 2003, the DOD Chief Information Officer granted approval for DTS to proceed with full implementation throughout the department. In October 2005, DOD established the Business Transformation Agency (BTA) to advance DOD-wide business transformation efforts, particularly with regard to business systems modernization. DOD believes it can better address managing defensewide business transformation, which includes planning, management, organizational structures, and processes related to all key business areas, by first transforming business operations to support the warfighter, while also enabling financial accountability across DOD. BTA operates under the authority, direction, and control of the Under Secretary of Defense for Acquisition, Technology, and Logistics, who is the vice chair of the Defense Business Systems Management Committee— which serves as the highest ranking governing body for business systems modernization activities. Among other things, BTA includes a Defense Business Systems Acquisition Executive who is responsible for centrally managing 28 DOD-wide business projects, programs, systems, and initiatives—one of which is DTS. In October 2004, responsibility for the policies and procedures related to the management of commercial travel throughout DOD transferred to the Office of the Under Secretary of Defense (Personnel and Readiness). Our analysis of the September 2003 DTS economic analysis found that two key assumptions used to estimate cost savings were not based on reliable information. Consequently, the economic analysis did not serve to help ensure that the funds invested in DTS were used in an efficient and effective manner. Two primary areas represented the majority of the over $56 million of estimated annual net savings DTS was expected to realize— personnel savings and reduced CTO fees. However, the estimates used to generate these savings were unreliable. Further, DOD did not effectively implement the policies relating to developing economic analyses for programs such as DTS. Effective implementation of these policies should have highlighted the problems that we found and allowed for appropriate adjustments so that the economic analysis could have served as a useful management tool in making funding decisions related to DTS—which is the primary purpose of this analysis. While the department’s system acquisition criteria do not require that a new economic analysis be prepared, the department’s business system investment management structure provides an opportunity for DOD management to assess whether DTS is meeting its planned cost, schedule, and functionality goals. The economic analysis estimated that the annual personnel savings was over $54 million, as shown in table 2. As shown in table 2, approximately 45 percent of the estimated savings, or $24.2 million was attributable to the Air Force and Navy. The assumption behind the personnel savings computation was that there would be less manual intervention in the processing of travel vouchers for payment, and therefore fewer staff would be needed. However, based on our discussions with Air Force and Navy DTS program officials, it is questionable as to how the estimated savings will be achieved. Air Force and Navy DTS program officials stated that they did not anticipate a reduction in the number of personnel with the full implementation of DTS, but rather the shifting of staff to other functions. According to DOD officials responsible for reviewing economic analyses, while shifting personnel to other functions is considered a benefit, it should be considered an intangible benefit rather than tangible dollar savings since the shifting of personnel does not result in a reduction of DOD expenditures. Also, as part of the Navy’s overall evaluation of the economic analysis, program officials stated that “the Navy has not identified, and conceivably will not recommend, any personnel billets for reduction.” Finally, the Naval Cost Analysis Division (NCAD) October 2003 report on the economic analysis noted that it could not validate approximately 40 percent of the Navy’s total costs, including personnel costs, in the DTS life-cycle cost estimates because credible supporting documentation was lacking. The report also noted that the PMO-DTS used unsound methodologies in preparing the DTS economic analysis. The extent of personnel savings for the Army and defense agencies, which are reported as $16 million and $6.3 million respectively, is also unclear. The Army and many defense agencies use DFAS to process their travel vouchers, so the personnel savings for the Army and the defense agencies were primarily related to reductions in DFAS’s costs. In discussions with DFAS officials, they were unable to estimate the actual personnel savings that would result since they did not know (1) the number of personnel, like those at the Air Force and Navy, that would simply be transferred to other DFAS functions or (2) the number of personnel that could be used to avoid additional hiring. For example, DFAS expects that some of the individuals assigned to support the travel function could be moved to support its ePayroll program. Since these positions would need to be filled regardless of whether the travel function is reduced, transferring personnel from travel to ePayroll would reduce DOD’s overall costs since DFAS would not have to hire additional individuals. According to the September 2003 economic analysis, DOD expected to realize annual net savings of $31 million through reduced fees paid to the CTOs because the successful implementation of DTS would enable the majority of airline tickets to be acquired with either no or minimal intervention by the CTOs. These are commonly referred to as “no touch” transactions. However, DOD did not have a sufficient basis to estimate the number of transactions that would be considered “no touch” since (1) the estimated percentage of transactions that can be processed using the “no touch” was not supported and (2) the analysis did not properly consider the effects of components that use management fees, rather than transaction fees, to compensate the CTOs for services provided. The weaknesses we identified with the estimating process raise serious questions as to whether DOD will realize substantial portions of the estimated annual net savings of $31 million. DOD arrived at the $31 million of annual savings in CTO fees by estimating that 70 percent of all DTS airline tickets would be considered “no touch” and then multiplying these tickets by the savings per ticket in CTO fees. However, a fundamental flaw in this analysis was that the 70 percent assumption had no solid basis. We requested, but the PMO-DTS could not provide, any analysis of travel data to support the assertion. Rather, the sole support provided by the PMO-DTS was an article in a travel industry trade publication. The article was not based on information related to DTS, but rather on the experience of one private sector company. The economic analysis assumed that DOD could save about $13.50 per “no touch” ticket. Since that analysis, DOD has awarded one contract that specifically prices transactions using the same model as that envisioned by the economic analysis. This contract applies to the Defense Travel Region 6 travel area. During calendar year 2005, the difference in fees for “no touch” transactions and the transactions supported by the current process averaged between $10 and $12, depending on when the fees were incurred because the contract rates changed during 2005. In analyzing travel voucher data for Region 6 for calendar year 2005, we found that the reported “no touch” rate was, at best 47 percent—far less than the 70 percent envisioned in the economic analysis. PMO-DTS program officials stated they are uncertain as to why the anticipated 70 percent “no touch” was not being achieved. According to PMO-DTS program officials, this could be attributed, in part, to the DOD travelers being uncomfortable with the system and making reservations without using a CTO. Although this may be one reason, other factors may also affect the expected “no touch” fee. For example, we were informed that determining the airline availability and making the associated reservation can be accomplished, in most cases, rather easily. However, obtaining information related to hotels and rental cars and making the associated reservation can be more problematic because of the limitations in the data that DTS is able to obtain from its commercial sources.