Meet the New Boss, Same as the Old Boss

April 12, 2019

This is the second in a series of op-eds that IAM is running to shed additional light on problems associated with privatizing the household goods program to a single source contractor.

The Risks of a Monopoly Managing the DOD Personal

In meetings with key leadership within the DoD and USTC on the idea to privatize the household goods program to a single source provider we have heard the following:

“The program is broken.” (Most of industry doesn’t think it is and we’ll address that idea in another post.)

And we also hear that, “USTC is partly responsible because we’re not moving experts, we’re warfighters.”

And finally, we hear, “We need to turn the program over to a ‘smart’ businessperson.”

It’s clear that, as they’ve admitted, the USTC doesn’t understand the industry, how capacity is created, and how the impacts of their decisions affect businesses across the country.

However, in spite of their self-acknowledged limits in understanding the moving industry, the USTC is convinced that they have developed a ‘solution’ that will somehow fix all of the problems they see within the current program. And that is without any data and in spite of the fact that the majority of experts in the business don’t think it’s actually a solution at all.

In reviewing the Performance of Work Statement (PWS) for the privatized single source contract, it appears the DoD is intent on making the new program look a lot like the current program. There are lots of the same very specific rules that dictate the bursting strength of cartons, that rugs should be rolled and not folded, and that items need to be removed from chests of drawers, among many other rules that are specific to the DoD.

There are also all of the same claims rules, with the addition of a couple of new ones. These, of course, will add to the cost of the program and create an additional set of ‘rules’ that will make some providers not want to deal with this type of business.

Yet, there are some proposed differences in the new contract for things that no one has ever suggested are ‘broken’. For domestic business, the proposal is to depart from the industry standard pricing based on a tariff and introduce an entirely new structure that fundamentally changes how every underlying service provider that provides service at the curb is compensated. That is sure to create confusion and distrust among the driver base, who still provide the majority of lift to the DOD.

And for international, the new program looks to break out the standard SFR to have a separate charge for packing and unpacking. There’s no clear advantage to doing it this way. It’s baffling why someone who admits they don’t know anything about the moving process would introduce such dramatic changes to a new contract.

Further, the PWS doesn’t address the one thing that everyone in the moving industry agrees is the primary problem faced by the DoD—the peak season surge, during which industry goes from handling approximately 5,000 DoD shipments to 12,000 shipments per week for about a 10-week period. In fact, with the onerous rules and the different pricing structure, the result is that even more movers might find it easier to stick with a known quantity and focus the efforts of their warehouses, trucks, and labor on other types of business like local moves, national accounts, or office moving. Now, the industry doesn’t expect a completely smooth distribution of shipments every week—we understand the various factors that contribute to a peak season—but we also know that there are numerous things that can be done to help mitigate the impacts, though none of them are addressed in the PWS.

The DOD still doesn’t understand that their biggest problem is demand that exceeds supply, and there isn’t anything in the proposed contract that addresses that or actually provides an incentive for any investment in capacity increases.

Here’s another specific example of how the DoD doesn’t understand the problems it creates, yet writes rules that actually make the problem worse while ignoring the input of industry.

Many DoD shipments require storage at destination, which must occur at a local facility that has been approved by the DoD. During the peak season, the local warehouses aren’t only seeing an increase in the number of shipments coming in to their storage, they are also experiencing a dramatic increase in the number of shipments moving out of their area.

Sometimes, especially in certain areas of the country, when a customer calls to get their items delivered out of storage, the warehouse won’t have an open spot on its schedule for many weeks. This is dramatically inconvenient to the customer, but the only way the warehouse can accommodate this customer’s delivery is by inconveniencing some other customer and cancelling their pick up or delivery.

Even if the inbound warehouse knows that it might not be able to deliver a shipment for several weeks, a Transportation Service Provider (TSP) is limited in the number of places where it can be stored. The DoD won’t pay to have it stored and delivered from an ‘out of area’ location. The DoD won’t even pay standard overtime rates to have it delivered on a weekend.

So, the ‘solution’ USTC came up with is to charge the carrier an inconvenience claim if they can’t deliver the shipment within 10 days of the customer’s requested date.

This is a perfect example of trying to fix the ‘effect’ of a problem rather than the root cause. The result will now be that agents will refuse to take storage if a TSP plans to hold them responsible for this kind of an inconvenience claim. That’s just added cost to the TSP. Or, in order to make the customer happy and avoid the claim they will have to cancel a shipment that is to be packed and picked up so that they can make the delivery. In turn, the canceled shipment will go back to the TSP to try and find an agent that can now pack and pick up the shipment. That will result in some customers not being able to get moved out because all of the quality capacity will have already been booked in the area…leaving the TSP with the choice of turning back the shipment or using an agent with lower quality. Helping one customer is going to hurt other customers.

The TSP didn’t decide the destination of these shipments. The TSP didn’t flood the area with too many shipments. And the warehouse, like every other moving business at this time of year, has a full book of business. They shouldn’t be penalized for being busy, especially by the party responsible for making them so busy.

And, there is no language in the new contract that addresses the problem. Rather, it maintains the requirement and adds yet another layer of cost and administration between the DoD and the TSP. The new program has all of the onerous rules, a radically different pricing model and no solutions to the actual underlying causes of the problems that result in lower customer satisfaction scores during the peak season.