DoD’s Contracting Initiative—Lather, Rinse, Repeat
This is the Eigth 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.
Over the last several weeks, our editorial pieces have attempted to highlight many of the significant issues that are associated with the DoD’s idea to completely outsource the Household Goods (HHG) program to a privatized, single-prime contractor.
Here are links to each of the articles:
The Risks of a Monopoly Managing the DoD Personal Property Program
Meet the New Boss, Same as the Old Boss
Outsourcing and the International Forwarder
DoD’s Contracting Initiative – a Rational Business Decision or a Roll of the Dice
In each of these write-ups, we’ve repeatedly stressed that the initiative adds a lot of unnecessary risk and upheaval to the relocating military customer and the moving industry.
The stated goal of the outsourcing initiative is to increase quality capacity. The U.S. Transcom Commander hasn’t articulated how the contract will do that. The draft RFP, as written, leaves household goods industry experts concerned how the contract will accomplish its intended goal. Simply saying that it will grow capacity certainly is no guarantee of increased quality for the military members who will be moved under the program and the continued quality of providers of capacity to the DoD.
Further, there has been no cost analysis of this new program or any review on how the program might actually make matters better (or worse), especially during the transition phase.
A pervasive fear of many in the moving industry is the outcome of what will happen to capacity and the need to successfully service our military customer in the immediate aftermath of a contract award. Once the winning bidder is announced, the entire DoD moving industry will take stock and determine what it means for their individual business models. Many local moving and storage agents will likely demand prepayment to service shipments that are being offered from any of the TSPs that are not a part of the winning bid. Those who might not have a future under the new contract will only be able to pay up front for so long before their cash reserves are exhausted, and therefore won’t be able to handle much capacity.
As the losing TSPs start to “blackout” their capacity, those TSPs who think they might be able to partner with the winning contractor will need to take on more shipments, but won’t have had a chance to develop their network and increase their scale of operations. Those companies will start to limit their exposure to avoid negative performance scores, which could impact their relationship with the winning contractor. Drivers of companies who aren’t sure of their future will feel pressured to leave the industry. Companies trying to posture for a role with the new contractor will not be ready or able to take on drivers leaving other companies since they won’t be prepared to expand that quickly.
The fallout from the above scenario will be a significant loss of drivers who will be able to find work in the freight market, likely for more money and with less physical labor involved. Crews, move managers, and others who are uncertain of their future will find other work to do (especially in light of today’s need for labor and low unemployment). The result is an extended nightmare for our customer, the Service Member, in the peak season of 2020 and 2021. For their sake, we hope we’re wrong. But it’s quite a gamble. Especially when there are other workable options on the table.
We continue urging the DoD to support our recommendation to have this program studied and to enter into a joint working group that includes the DoD leadership at the highest levels, who can take a holistic view of the program. Industry experts have provided U.S. Transcom with resounding feedback about how to proceed but, to date, those experts are being ignored in favor of the DoD’s limited understanding of the complex household goods marketplace.
In the meantime, we know there is a lot of scrutiny on the PCS peak season this summer and we encourage all of our members to do their best to make sure to provide our military customer with the highest level of customer service. We’ve seen the industry respond and grow our overall Customer Satisfaction Scores over the last several years, and we know that the industry is capable of achieving the highest levels of success.