What we found was that leading organizations have cut administrative costs—some cut expense report processing costs by more than 80 percent—and time—what once took 3 weeks can now be done within 48 hours—as a direct result of reengineering how they arrange and process travel. Their total administrative costs per trip now range from about $10 to $20. They achieved these improvements by consolidating travel management and processing centers, eliminating unnecessary review layers, simplifying the travel process, and streamlining and automating the expense reporting process and integrating it with the financial system. Most federal agencies’ administrative travel costs and processes, on the other hand, lag behind those of leading organizations, although some agencies have begun to close the gap. Many agencies have not determined what their administrative travel costs and processes are, and for those agencies for whom costs were determined, their administrative costs per trip ranged from about $37 to $123—1 and a half to 12 times more expensive than the leading organizations. Many federal agencies use numerous processing centers, require multiple travel documents, and fill out these travel documents manually or maintain travel systems that do not have an agencywide automated interface with the financial system. Part of the problem has been that a primary focus of many federal agencies’ travel management has historically been on maintaining and monitoring compliance, rather than on managing costs and efficiencies. This is not to say that all federal agencies’ processes are poor or that administrative costs are high. Indeed, most agencies’ travel costs and processes lie along a continuum of performance. Some agencies, in fact, have reduced their administrative costs to levels that begin to match those of leading organizations. The Internal Revenue Service (IRS), for instance, has reported total administrative costs of about $39 per trip, while the Forest Service (region 5) has reported administrative costs of about $37. And there are also several agencies, including GSA and the Departments of State, Transportation, Defense, and Energy, who have initiated pilots that could go a long way to improving operations and reducing administrative travel costs. Figure 1 provides a listing of estimated total administrative costs for the leading organizations and four civilian agencies. The figure also shows administrative cost estimates developed by six DOD agencies, although these estimates may not be fully comparable. In addition, the chart highlights two estimates—current federal agency costs per trip and improved costs per trip—that were developed by a travel improvement task force from the Joint Financial Management Improvement Program (JFMIP). Comparable civilian agency cost estimates (includes estimates from the Forest Service (region 5), IRS National Office, JMD, and State) DOD cost estimates (includes estimates from the DOD Language Institute for both the Army and Air Force, DOD Performance Review, the Air Force District of Washington, Naval Post-graduate School, and NSA) Figure 2 shows where agencies stand in their identification of administrative costs. The chart breaks the agencies into three groups—those that could identify all administrative costs, those that identified some of their administrative costs, and those who could not identify any of their administrative costs. Finally, the following table lists the travel practices of the leading organizations and compares them to the practices of federal agencies, as found in our survey. When looking at the leading organizations and what they have accomplished, it is important to remember that all of them found themselves, at one point or another, in a situation very similar to where many federal agencies now stand—they had to reduce costs, while at the same time dramatically improving service to the customer. These leading organizations set out to rethink and redesign how their financial management processes, including travel processing, were conducted. In doing so, the leading organizations shared many of the same characteristics: they generally assessed travel management as part of a larger, financial management reengineering effort, they benchmarked themselves against other recognized organizations, and they instituted a common set of best practices. The strategies used by these leading organizations in reengineering and adapting their practices can be grouped into three common areas: consolidation, simplification, and automation and integration. By addressing all three of these areas, the organizations were able to achieve dramatic cost and process improvements. A travel manager from one of the leading organizations told us that after assessing current practices and processes, the first thing he would do when embarking on an improvement effort would be to consolidate operations. Before they started reengineering, leading organizations had business units that operated independently. Each unit was responsible for making travel arrangements and for processing their own travel. For instance, one organization was processing expense reports at over 300 separate locations. These decentralized operations can (1) lead to duplication of effort because each unit has to be responsible for similar processes, such as reimbursement and expense processing, (2) reduce opportunities to achieve economies of scale, (3) make organizationwide travel policy enforcement more difficult and inconsistent, and (4) hinder the organization from gathering and maintaining organizationwide travel data. Leading organizations realized that they could cut costs and improve service by having central, organizationwide sources for making travel arrangements and for processing expense reports. They also established a central travel management group to oversee organizationwide travel and to establish, monitor, and enforce travel policies. As processing locations were consolidated, the organizations found that they were able to reduce costs and cycle time. They also began to maintain travel data on the organization as a whole. These corporate travel data can be particularly helpful in negotiating rates with vendors. The leading organizations also reduced the number of travel agencies that they were using. There are several benefits that can be gained from this. For instance, this can (1) assist in uniform monitoring and enforcing of the organization’s travel policies, (2) ensure consistency in how services are provided, and (3) provide management reports on the travel patterns of both individual travelers and the organization as a whole. This travel information is particularly helpful in monitoring policy compliance, tracking travel trends for negotiating rates with travel vendors, and for comparing actual to reported expenses. The second strategy used by leading organizations was to simplify operations, for both the traveler and the organization. Such simplification includes eliminating the need for front-end travel approval and consolidating all expense reporting on one form. Two of the organizations even automated the expense reporting process once they had decided on a streamlined reporting structure. A travel manager from one of the leading organizations noted that prior to reengineering, up to seven signatures were required to approve one expense report; now the expense report is automated and the only approval step occurs at the back end of the process after the voucher has been processed. Consolidating information also cuts cycle time, makes it easier to track costs, and provides easier access to data because all information is maintained in one central location. Leading organizations also simplified and streamlined operations by mandating the use of charge cards for all transportation and lodging expenses, as well as for cash advances, cost areas that can account for 80 to 90 percent of all travel expenses. One organization, in fact, requires an explanation for any instance in which the corporate charge card is not used for at least 90 percent of all business travel expenses. A key benefit of using a corporate charge card is eliminating advance processing costs and cycle time. Under the old system, a traveler would have to spend time filling out an advance request form and getting it approved by a supervisor. The organization would also have to keep an amount of petty cash on hand at various cash windows. And the organization had to track and reconcile each cash disbursement that occurred. By mandating charge card usage for cash advances, an organization can eliminate the processing time and costs for getting the advance, no longer has to maintain petty cash at cash windows, and can conduct one reconciliation for all travel expenses. Other benefits of using a corporate charge card are that it provides greater cash management and establishes better information management. Finally, once leading organizations had assessed and consolidated their current processes, they looked to use automation to further simplify and streamline operations. They integrated expense reporting with travel expense processing, built policy conformance checks into the travel system, reimbursed travelers electronically, and developed a management information system to maintain the travel data that were being gathered. Maintaining this information gives an organization the specific information it needs when negotiating rates with travel vendors and setting predetermined travel costs. It also helps to track and enforce policy compliance and provides greater assurance of data integrity. As mentioned previously, two of the leading organizations we talked to developed an automated expense reporting system as part of their consolidation and simplification efforts. The expense reporting systems they developed are user friendly and provide various aids to the traveler, including calculating expense totals and maintaining current per diem rates. One organization’s system builds policy compliance into the traveler’s expense reporting by using a series of prompts and questions to highlight exceptions to policy. The system prompts the traveler to provide reasons whenever a response deviates from policy, such as using a noncontracted vendor or exceeding per diem rates. The system highlights the exceptions to the approving supervisor, who must approve all of them before reimbursement can occur. The system also produces a report that highlights to senior management all approved exceptions. Another benefit of automation is the reduced cycle time provided by electronic reimbursement. For instance, prior to implementing their automated systems, it took two leading organizations over 3 weeks to reimburse travel expenses. Now a traveler can travel one day, submit an expense report the next day, and be reimbursed the following day. A final benefit of automation is that all travel information can be maintained in a central repository. As one travel manager from a leading organization noted, “travel management is really about information management.” The information that is gathered can come from a variety of sources, including the charge card company, booking information from the travel agency, and expense information from the expense reporting system. This information is useful to analyze and compare what was booked, what was charged, and what is claimed. Mr. Chairman, a question you or others may be asking now is whether federal agencies can match what these leading organizations have done.