DoD’s Contracting Initiative—If It Ain't Broke...

May 03, 2019

This is the fifth 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

It’s safe to say that pretty much every single person who does anything in the DoD household goods industry—including U.S. Transcom, the military services, the PPSOs, or the service members being moved—all agree that the current Defense Personal Property Program (DP3) can be improved.

We have seen consistent and regular improvement in many areas over the years. Since DP3 began, we have seen overall service levels improve dramatically as the overall customer experience has improved. At the beginning of the DP3 program, the published average score was 77.54 and now is 87.69 for domestic business and 77.63 and 84.88, respectively for international business. Furthermore, TSPs have call centers to actively “move manage” shipments in order to provide better communication and responsiveness with our customers—which is a level of attention that never existed in the old DoD program.

In business, you often hear the term ‘continuous process improvement’ to indicate the idea that every business process needs to constantly be examined for refinement and improvement. Nothing is ever perfected; it is only improved until the next iteration. That’s been the major philosophical driver behind many of the most popular managerial approaches of the last half century. It includes Lean Six Sigma, value stream mapping, Kaizen, and many combinations and permutations of the systems made popular by Toyota.

After the old DoD program was completely reengineered and the new program became DP3, the general idea has been to apply incremental changes to the system to improve it. This is evidenced by the meetings we have with USTC, including PPFs, weekly peak season calls, and tariff updates. The problem is that changes have been made without a holistic view of the overall process, and the improvements suggested by the industry stakeholders—who are the experts in providing the curbside service and capacity to make the system work—are regularly ignored.

We ask for carrots, but receive sticks.

Over the last several years, Individuals operating with a narrow view of the entire system have recommended changes that address a perceived problem within their own part of the workflow without a proper understanding of the entire process. A perfect example is the change in the way TSPs are paid for providing external crating on special items like a motorcycle or a glass table top.

At some point, USTC was made aware of a couple of crates built for a move that were deemed very, very expensive. This discovery led to a complete restructuring of the way every crate on every shipment is paid for. Further, crating was removed from consideration of the general inflation index that keeps the other parts of the tariff competitive with other buyers of relocation services.

When industry made USTC aware that TSPs routinely pass through 100% of this charge to the actual provider of the service and that this would have a negative impact on agents, they proceeded anyway. This and many other reductions in revenues that are routinely passed through to agents have taken dollars out of every shipment that used to flow to the agents. An understanding of the entire process would have fixed the specific situation that led to the handful of very expensive crates and not addressed every other crate that was properly priced for the entire industry.

Another perfect example is the decision to allow an inconvenience claim when a shipment can’t be delivered out of SIT (storage in transit) by an agent within 10 days during peak season (5 days non-peak). This stick, intended to punish TSPs/Agents, hurts capacity as we’ve explained with very specific examples earlier in the series.

Carrots requested by the industry

Emphasize quality over price – Currently a Transportation Service Providers Best Value score is based 70% on quality (customer surveys) and 30% on price. Perhaps more emphasis should be placed on those TSPs providing better service by increasing the percentage of the BVS that comes from quality to higher than 70%.

Price constraints – in addition to the 70%/30% restraint, there are undefined rate filing restraints from USTC, and the International Through Government Bills of Lading (ITGBL) program faces restraints due to the unique calculation of the rate score. Elimination of those restraints would incentivize capacity building.

Help reduce the peak season demand – Industry understands that DoD can’t have a flat number of moves every month; rather, we believe that some moves can be shifted outside of the very short ‘peak of the peak’ window when capacity is strained to the maximum and customer satisfaction is lowered as a result.      

Change the mindset at PPSOs – During the last several years, there has been a cost containment ‘witch-hunt’ that has created a culture that refuses to pay for extra services that would improve the move for a customer. If the customer can benefit, approve the service. Don’t force the TSP/Agent to eat the cost or risk of the claim.

Provide greater blackout granularity – We keep asking for this and keep being told we have enough granularity. It is not granular enough and we have provided very detailed examples of how capacity can be better utilized with more granularity. Enhancement of the blackout tool will result in a higher quality product at the curb, allowing those TSPs to not do business in areas where their resources are limited.

Reduce DoD-specific regulations that don’t add value to the customer – For example, PPSOs spend countless man hours identifying ‘method and manner’ violations to inventories, and then the TSPs spend countless hours reviewing, researching and responding to the PPSO. These violations don’t improve the service for the customer. They take our focus off of the important thing—was the customer satisfied?

Regularly update overseas linehaul tables and SIT handling charges for international shipments both within CONUS and OCONUS – In the old program, SDDC (now USTC) had annual rate reviews which allowed industry to provide data and substantiation to accessorial charges. This review is needed to allow the DoD business to remain attractive to the agent community.

DoD can achieve a better program by implementing these kinds of changes and working with industry to understand the entire process and the full impact of changes. This approach requires DoD to participate at higher levels of responsibility and authority than they have in the past. Or, maybe, it requires DoD to bring senior leaders to the table who are not trapped in the weeds of program management, but can look at the needs of the entire enterprise at the strategic level to help improve the member’s experience while also implementing change that keeps the DoD-industry partnership healthy for the long term.