IAM Submits Comments to USTRANSCOM on Household Goods Channeling Concept Pilot Program

November 10, 2015

November 9, 2015                                                                                                                                                          

 

US Transportation Command,

The International Association of Movers (IAM) is a trade association with over 2000 member companies, many of which participate in the Department of Defense’s Defense Personal Property Program (DP3).

Our membership and thus the Association have a vested interest in the health and success of DP3. That is why IAM is compelled to respond to the U.S. Transportation Command’s recent Federal Register Notice which requested comments regarding the proposed ‘Household Goods Channeling Concept Pilot Program’.

IAM believes the proposed pilot is ill-conceived and poorly timed. We have been told that this initiative has been in the planning stages for over a year and during that entire time the household goods industry has never once been brought into the discussion regarding the Concept of Operations (CONOPS) for the Pilot. That begs the question….why would a key stakeholder, which in all likelihood will determine the success or failure of the Pilot, not be included in any of its planning? Besides not being included in any of the planning the industry was never even alerted to its existence. The industry only first became officially aware of the Pilot’s existence with the issuance of the Federal Register Notice on September 8, 2015.

The DOD has spent years developing the Defense Personal Property Program. For the six years that DP3 has operated it has been “tweaked” and adjusted to help bring the program to the point that all of the stakeholders are just now starting to work efficiently in the program. We have a program that has matured to the point that the quality of the program is at its highest levels ever, based on the mean Customer Satisfaction Scores (CSS), and cost savings to the government over the previous program are significant. Why would DOD want to detract from those gains? We need to let the current DP3 model fully mature before we introduce any further significant variables, like the Channeling Concept, to the equation.

DP3 has still not yet reached Full Operating Capability (FOC)! We are incredulous that USTRANSCOM would want to introduce this new untested element to the program before all aspects of DP3 have been introduced. The proposed pilot is an element that was never imagined to be part of the program and to introduce this totally new element before FOC seems to be counterproductive. How can USTRANSCOM ever truly evaluate the level of success for DP3 if it introduces a huge variable midstream that was never envisioned to be part of the program?

If saving money is the goal of the Pilot, and it appears that is one of the principal reasons that the Pilot has been introduced, we believe that USTRANSCOM need only look back at the Business Case Analysis (BCA) that was commissioned by the Office of the Secretary of Defense for Transportation Policy (OSD-TP) 3+ years ago. The BCA, conducted by LMI, researched the feasibility of outsourcing the DOD personal property program to a single entity to determine if cost savings could be obtained. This closely resembles the “winner-take-all” concept proposed in the Channeling Concept Pilot. After an extensive analysis the BCA generally indicated that there were very little, if any, cost savings to be garnered from the transportation costs if a sole source/winner-take-all concept was introduced to the personal property program. This was an extensive study in which IAM was a willing and active partner. The bottom line is that DOD has researched this type of concept previously and found it to be without merit. Why is USTRANSCOM once again considering a concept which has already shown no economic benefit?

Adding the variable of a pilot program also adds a greater level of uncertainty to DP3 that will stymie industry investment in the program. In the five to six years since program inception, change has been the mantra. For industry, predictability and forecasting has been difficult at best. The program is just starting to mature and Transportation Service Providers (TSP) have just started to understand how to make concrete projections regarding what their future volumes will be. Injecting this new variable may move TSPs to withhold further investment in DP3 until that they fully understand the Pilot’s impact on the current environment. The resulting investment reduction will negatively impact capacity throughout the entire DP3 program.

Small businesses make up over 70% of the DOD personal property infrastructure. We see the Pilot having a negative effect on those small businesses. It seems very unlikely that a small business would be able to bid on the Pilot as a prime contractor due to the very large daily minimums called for in the CONOPS. They also could see their participation in DP3 reduced due to the winner-take-all concepts. With one award winner and a few possible alternates the number of subcontractors, i.e. small businesses, will likely be reduced.  Thus we see a significant reduction in small business participation in the channels participating in the Pilot.

When looking at the specifics of the CONOPS we see many questions that must be addressed in advance of any request for offers:

1)      Very high and poorly defined tonnage minimums…..what does a 135,000 lb. daily minimum really entail? Is it packing, loading, is storage intake included?

2)      Will the Defense Personal Property System (DPS) determine when daily minimums have been met and then move the awards to the secondary award winner automatically? Have system upgrades to DPS been made to account for all of the differences in the “normal” DP3 Volume Move process vs. the ones included in the Pilot, i.e. weight vs. shipment count determinations?

3)      The issue of only accepting rates lower than the current rate on file is problematic. Those rates, under the current timeline would be non-peak rates and would be required to be used during the bulk of the peak season. This is counter to the current DP3 business rules. Bidders need to be able to use Peak Season rate structures during the Peak Season and the Pilot does not account for this.

4)      We do not feel that Pilot success criterion is well defined in the CONOPS. Is cost savings the major determiner of success? Will the pilot’s effect on other areas of DP3 be considered? If so, HOW?

5)      The winner-take-all concept puts tremendous pressure on the Pilot award winner and possibly even more on the 2nd and 3rd level winners. They may be called on to step in for the initial award winner after they had already exhausted their capacity. They will not be able to hold capacity just in case the initial award winner defaults or reaches their maximum requirements.

6)      How do short fuse shipments, i.e. awards within 5 days of pickup, be handled in the pilot? This is not defined at all. Will the award winner be required to take all traffic, even short fuse shipments? Will short fuse shipments be available to ALL TSPs or only those involved in the Pilot? The whole issue of short fuse shipments in the pilot remains an unknown.

7)      The idea of pulling channels and tonnage from the regular DP3 program needs serious consideration. What 2nd & 3rd order effects will this have, not only on the areas directly affected by the pilot program, but the program in its entirety? We believe they will be significant, particularly when it comes to a reduction in available capacity.

8)      Punitive actions and CSS…..it seems that both areas will affect not only the shipments involved in the pilot but also in all other aspects of DP3. Is this correct? If so, to what degree?

9)      We believe that the Pilot will have significant negative effects on the origin and destination agents in the areas covered by the Pilot? They will be required to hold trucks, men and warehouse space available for the pilot and in turn reduce capacity available for shipping to other locations? When daily minimums are not met those agents will be negative impacted financially and DOD will have lost the capacity that was in actuality available to them.

IAM believes that the Household Goods Channeling Concept Pilot may cause irreparable damage to the Defense Personal Property Program if it is allowed to move forward as currently outlined in the Pilot CONOPS. It is ill-timed and stands to wreak havoc on the 2016 Peak Season. Capacity in all aspects of DP3 will be affected and it raises major concerns regarding its impact on the quality of service that will be provided military members, particularly in the areas directly affected by the Pilot.

IAM believes that DP3 should be allowed to reach FOC and fully mature before any significant programmatic changes, like the Channeling Concept, are attempted. Now is NOT the time to introduce this additional requirement to DP3.

Sincerely,

 

Charles L. White

Senior Vice President

International Association of Movers

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