Moving Violations
recently retired Navy captain, looking back on more than 25 years in uniform, can still picture the movers that showed up the first time he was reassigned to a new duty station. They arrived drunk and kept right on drinking as they packed and loaded the hard-earned possessions of the young officer and his wife. "I remember one of the guys standing out on the balcony of our second-floor apartment, dropping our television into the waiting arms of another mover standing on the ground below," he says. "I thought, 'This is unbelievable.'"
What was unbelievable the first time he moved became all too predictable over the course of his career. The retired officer, who asked that he not be identified because he now works for the Navy as a private contractor, can measure his career in personal property losses, damage to family heirlooms and stolen or lost antiques. His worst experience was relocating to Florida from Japan. When movers began unloading the shipment at the family's new quarters, the officer thought he saw the upholstered seat of an antique Mary Washington chair move on its own. After looking at it for a moment, he realized it was moving. "I mean it was undulating. The shipment was filled with bugs. Bugs were inside everything."
"For three days we were in hell," he says. The family was in limbo, trying to get the movers, the Navy, anybody, to deal with the problem. A pest-control expert determined the packing paper had held eggs of mites and lice, which hatched in a humid storage environment.
"Finally, [the moving company] tented my house and gassed it, if you can imagine that. We had to throw out every box and piece of paper. All the furniture had to be professionally cleaned or reupholstered. We lost clothing that had been damaged by mildew. I can't even begin to tell you how much money we lost, and time, in dealing with this."
Broken System
The remarkable thing about the captain's experiences is that they're not remarkable at all. "We get a lot of horror stories," says Joyce Raezer, deputy associate director for government relations at the National Military Family Association, a nonprofit organization that represents military families. The hassles and damage associated with moving present a major quality-of-life issue for service members, many of whom will move 15 to 20 times over the course of their careers.
A Defense Department task force created in 1994 to reengineer the military's system of moving household goods catalogued some of the worst problems. They included shipments delivered soaking wet, valuable antiques lost or stolen, and severe damage to furniture caused by negligent packing and storage. One driver sold a service member's furniture en route to its destination to finance a drug habit and then abandoned the truck. Another carrier had welding performed on a truck while it was packed with goods, sparking a fire that destroyed its trailer's contents.
The Defense Department pays commercial carriers more than $1.2 billion annually to move 650,000 military personnel. (Civilian employees, who tend to relocate much less frequently, are governed by different regulations.) DoD is the single largest customer in the personal property shipment business, accounting for more than 15 percent of the industry's business. But the Pentagon, burdened by its cost-driven, regulation-heavy system for moving military personnel, hasn't been able to bring its purchasing power to bear in the market. In 1996, service members filed more than $100 million in damage claims, about 10 percent of program costs. More than $79 million of that was paid from the operations and maintenance accounts of the sponsoring service or agency-about $42 million of which was eventually recovered from carriers.
"The department appears to be at the mercy of the moving companies in resolving these damage claims," the task force concluded in a 1998 report. Defense Department records show that one in four military families file damage claims following a move-a rate two and a half times higher than that of the private sector. While moving industry officials believe the claims rate is overstated, Defense Department officials say the rate of damage is actually much higher, because the claims process is so time-consuming and burdensome many claims are never filed. In addition, because claims are paid only on the depreciated value of goods, not the full replacement value, service members often conclude that filing a claim isn't worth the hassle.
"Obviously, these are not standards we find acceptable," says Mary Lou McHugh, assistant deputy undersecretary of Defense for logistics and transportation policy. This month, the Defense Department plans to issue a request for proposals to begin a pilot program in June to test the use of private move managers in helping service members relocate. The pilot, called the Full-Service Moving Project, is expected to outsource administrative functions to relocation companies and test new management practices on about 45,000 moves.
The pilot project is intended to lay the groundwork for completely revamping the way service members relocate by streamlining the moving process, simplifying claims processing and providing full-replacement value coverage. Currently, the Military Traffic Management Command (MTMC) manages the shipment of household goods by contracting directly with service pro-viders. Eventually, DoD officials say they would like to adopt the approach generally used in the private sector: outsource the work to relocation companies that will serve as a single point of contact for service members throughout the relocation process.
The Full-Service Moving Project will be the fourth and most extensive pilot program the Defense Department has begun in four years. Two other pilots, one begun in 1997 at Hunter Army Airfield near Savannah, Ga., and another administered by MTMC in three states, are testing the use of third-party moving management companies. Pentagon officials expect to expand on those programs with the Full-Service Moving Project.
Lost Cost, Poor Performance
The National Military Family Association, a longtime advocate of reforming the system for relocating military personnel, believes the pilot programs represent an important step in the right direction. "We like the relocation manager approach," says Raezer. "We want someone to be accountable. This is about more than just picking up goods and moving them from point A to point B. We've been very supportive of DoD's efforts in the pilot programs. We've just been saying, 'You need to work a lot faster.' "
In August 1997, Deputy Defense Secretary John Hamre ordered a complete review of the department's relocation process with three objectives in mind: meet DoD's operational mission requirements, improve service to military personnel and reduce costs to the government.
While the objectives are clear, the solution is anything but. No single organization at DoD has responsibility for the entire relocation process. The undersecretary of Defense for acquisition and technology sets policies on the use of government transportation, booking arrangements and use of federal lodging facilities. The DoD comptroller handles the payment of travel expenses. The undersecretary of Defense for personnel and readiness oversees relocation allowances and entitlements policies. In all, more than 1,000 pages of regulations and policies govern the relocation of personnel and their property. Simplifying even a small part of that process-the shipment of household goods-is a major undertaking.
Defense officials estimate the average service member spends between 111 hours and 169 hours simply arranging a move. Service members must visit as many as nine different offices when leaving a base, and as many again upon arriving at a new base. They interact with dozens of people to arrange for goods shipments, personal transportation, housing, school registration for their children, and other administrative functions.
Even when a military family's household goods are delivered on time in perfect condition, the out-of-pocket costs can hit employees hard. For instance, current policies do not provide temporary living allowances or cover miscellaneous expenses for first and last moves. In one example cited in the reengineering task force report, a newly recruited airman with a wife and one child moving to Maxwell Air Force Base in Alabama, could easily incur temporary living expenses of $75 to $110 a day. Over a 10-day period the recruit could rack up more than $1,000 in uncovered expenses-a huge amount of money on an airman's salary. The travel system is so complex that inexperienced travelers are often overwhelmed and make poor decisions for lack of reliable information.
But bureaucratic complexity only partly accounts for what DoD officials say is a 75 percent dissatisfaction level with the moving process among military personnel. Another problem is that MTMC awards shipment contracts to the lowest bidders, regardless of their past performance, and distributes traffic evenly among contractors. There is nothing to prevent companies from establishing multiple firms that exist in name only to obtain a greater share of the Pentagon's business. As a result, DoD tends to attract some of the poorest-performing movers and carriers, many of whom exist solely to do business with the military.
Some movers say DoD has only itself to blame. "For more than 25 years starting in 1974, DoD promoted and vigorously defended its low-cost carrier approach to the acquisition of transportation services because it resulted in lower costs to the government," said David Nilson, president of Nilson Van & Storage in Columbia, S.C., at a congressional hearing last March. "Many steps were taken by DoD in that period to foster low-cost competition among carriers over the moving industry's strenuous objections. A prime example of this is the DoD decision to increase the number of carriers an agent could represent at a military installation. That step resulted in a mushrooming of the so-called 'paper companies' DoD will tell you today are the scourge of the current program."
The Defense Department has refused for 16 years to raise the baseline transportation rates that are the basis for carrier bids to provide service, said Nilson, whose company has done business with DoD for more than 60 years. "The result has been a you-get-what-you-pay-for climate, which, of course, does not translate to the quality service DoD now insists must result from its new programs," Nilson said.
The owner of one successful moving company in northern Virginia says he has no interest in doing business with the Pentagon. "I can't do all their paperwork, do the work, and do it right, for what they're willing to pay," he says. "It's too much hassle and there's plenty of other work out there for me. I would guess that what sometimes happens is the military winds up with these fly-by-night operators who promise low cost."
Disputed Claims
Defense officials hope to demonstrate in the pilot programs that spending more on higher-quality movers will eventually result in savings from lower claims rates, reduced administrative costs and improved customer satisfaction. But the approach the department is taking in three of the pilots-outsourcing much of the work to third-party relocation managers-has the moving industry on the offensive.
Trade associations representing the moving and storage and carrier industry oppose any DoD efforts that would hurt small businesses. Relocation companies, industry representatives say, are naturally biased in favor of large carriers who do large volumes of business. If these third-party contractors control the distribution of traffic, in which they have a financial stake, small businesses will be hurt. In addition, such a relationship would make the carriers subcontractors to relocation companies, an untenable position, according to industry officials.
"There will be a lot of people that shake out of the business," says Terry Head, president of the Household Goods Forwarders Association of America, who acknowledges that the system has attracted some low-quality carriers who probably shouldn't be in business anyway. But Head says many quality small businesses will also be hurt under the MTMC pilot and eventually under the Full-Service Moving Project.
The Defense Department is still working out how traffic will be distributed under the pilot program, says McHugh. One possibility will be to allow carriers to file rates with DoD, which will provide those rates to the relocation companies, essentially putting DoD in the middle of the very business it's trying to get out of.
Head doesn't believe the current system is as bad as DoD contends, and believes its reform effort is misguided. In particular, he doubts the Defense Department's assertion that the claims rate is 25 percent. He says the moving industry has begun collecting data in an effort to document fraudulent claims, including multiple claims being filed on the same items, move after move. "There is a culture in the military to make money on a move by filing a claim," Head says.
"I would totally disagree with that," says Col. Kevin Keady, the surface transportation assistant in the Office of the Assistant Undersecretary of Defense for Logistics and Transportation Policy. "Filing a claim is a huge pain. How do you make money on a claim that's a depreciated value?"
To ensure the Pentagon only contracts with reputable carriers under the Full-Service Moving Project, the Defense Department has hired Dun & Bradstreet Corp. to evaluate pilot program contractors for past performance and financial stability. DoD has also contracted with the Gallup organization to conduct surveys on the level of satisfaction among service members who participate in the pilot.
But even if the Full-Service Moving Project is successful, for the foreseeable future, most service members and their families will be stuck with the same low-bid service to which they've grown accustomed. "It pains me to say this," says McHugh, "but it will be several years" before the vast majority of military families experience the benefits of reform.