Defense seeks to implement new relocation payment process

Next month, the Defense Department plans to implement a new system to speed up the payments to companies that handle the process of moving military families to new posts.

In a Federal Register notice published Monday, Military Traffic Management Command officials proposed requiring the military to use the PowerTrack system from U.S. Bank to pay Defense transportation contractors.

Currently, contractors wait 30-90 days to be paid for their services, but with PowerTrack, the bank could pay contractors as quickly as three to five days after a move was completed, MTMC officials said. Under the rule, a few contractors would begin using the system next month and the majority would start using it in 2004.

With the new approach, contractors would "no longer have to deal with what's, for many of them, a huge bureaucracy" at the Defense Finance and Accounting Service, said MTMC spokesman John Randt. "The bank pays them and then the bank collects from DFAS and they get a 1 percent fee for the service."

The Defense Department spends more than $1 billion each year moving military service members and their families. That includes the cost of transportation, storage and management of household furniture, goods and baggage. MTMC, the Army component of the U.S. Transportation Command, manages about 500,000 moves a year. The process has been riddled with problems, and Defense officials have embarked on an effort, known as "Families First," to implement a new system by late 2004.

The new program, estimated to cost 13 percent more annually than the current relocation program, will use a performance-based contract structure, getting feedback from service members to determine the best-performing contractors who, in turn, will get the most Defense business. The new system also features streamlined claims processing and payments to service members for the full replacement value of lost or damaged goods.

Part of implementing the new moving program includes contracting with U.S. Bank to handle payment services and removing DFAS from the payment process, said Tom Hicks, chief of the personal property division at MTMC.

"It streamlines the automation of the transportation processes," Hicks said. "We're moving from an old antiquated paper-intensive process to an automated process."

A few contractors have questioned the wholesale adoption of the new process, according to the notice in the Federal Register. One vendor warned Defense officials to work out kinks with their use of the 1988 Prompt Payment Act before requiring contractors to use PowerTrack. Another vendor asked for more time to prepare for the program's implementation.

The law calls for penalties for agencies that fail to make payments to contractors on time. But Hicks said those misgivings might fall away once contractors realize the time saved by the program.

"They have to look at the total program and the benefits it brings, not just that one aspect," Hicks said.