Defense Hits Turbulence on Takeoff

s the Defense Department rolls out its long-awaited paperless end-to-end travel management system, small travel offices are standing by for a second chance to compete to provide travel management services to the department.

Defense's 3.5 million active duty service members, reservists and civilian employees file about 5 million vouchers for $5.5 billion in travel costs annually. The Defense Travel System-under development since 1995-has cost the government at least $190 million as project managers worked through the technical troubles that hindered the system's launch.Pentagon officials continue to push forward with the project and as of July, DTS was up and running at 20 of the department's 11,000 worldwide sites.

Before DTS, commercial travel offices provided traditional travel services to Defense employees-booking airline, hotel and rental car reservations-and charged fees for each transaction. The travel offices also provided monthly management reports that detailed where federal employees traveled, as well as which hotels, airlines and car rental companies they used.In June, Defense officials brought online the latest version of DTS software, Enhanced Jefferson. The new software is Internet-based and works much like other online travel reservation Web sites, such as Travelocity and Expedia, allowing travelers to plan each detail of their trips. That itinerary is then electronically transmitted to the travel contractor, which purchases the tickets, saving the government several steps and lots of paperwork. The new program also incorporates Defense travel rules, so it calculates per diems automatically and enforces rules requiring travelers to use designated contract carriers when traveling between particular cities. It also identifies areas where more information or justification is needed.

"This was a significant step forward in providing increased functionality and improved user-friendliness for travelers, authorizing officials and travel administrators alike," says Paul Joyce, chief of the DTS travel re-engineering branch. "Today, DTS is totally Web-based, with a commercial industry look and feel."

The new Web-based structure removes several steps from the process, allowing DTS officials to reduce contractor transaction fees. That led DTS, in November 2002, to issue a request for proposals (RFP) designed to set up fixed-price transaction-fee contracts for travel management and other services with small commercial travel offices. Under the proposed contracts, the travel offices would provide traditional travel booking services as needed, but all arrangements would be made using DTS software. When Defense officials crafted the solicitation, they sought to ensure strong competition among travel offices, maintain the regions already supported by small businesses, and avoid entering into so many contracts that cost savings were wiped out.

But after the solicitation was issued, several small commercial travel offices protested, questioning the fixed-price structure, the method used to determine prices and the department's decision to bundle several travel services into a single procurement. "The Defense Department wanted to enter into new contracts that would provide lower transactions fees as DTS gets used more and more," says Josephine Ursini, an attorney who represented 10 small travel offices in the bid protest. "The problem is that DTS has not been proven to work yet and that nobody really knows how much it would cost a contractor to fulfill all of a contract's requirements using DTS."

The travel offices also charged that the contract would provide them no protection if DTS failed to work. "To give the government credit, they recognized that the system was going to have problems and they put in a price adjustment provision, but it wasn't artfully drawn," says Lars Anderson, who represented two small contractors in the bid protest. Anderson says the RFP capped the damages due the offices if the system failed to work as planned. "They said if the system failed, it wouldn't cost the contractor any more than it would cost to use traditional services, [in other words,] 'You'll get this amount and no more.' But oftentimes it costs more to straighten something out than if you had just done it the old-fashioned way to begin with." Adds Ursini: "We don't have a problem with the DTS system, but don't ask us to price it until it's finished and ready. Come back to us if and when it works."

In its June 30 decision on the protest (GAO-B-292101), the General Accounting Office found that Defense's price evaluation scheme was fundamentally flawed. GAO found that DTS officials were asking contractors to set and agree to prices for years during which DTS would not be used. DTS is scheduled to be released incrementally over the next few years, with departmentwide deployment not expected until 2006. GAO recommended that Pentagon officials reopen the bidding process.

DTS' Joyce contends that the pricing structure should have come as no surprise to contractors since it was based on travel industry suggestions. "Numerous meetings were held with industry before and after the release of the request for proposal to discuss the proposed pricing structure for both traditional current-day transactions and DTS transactions," he says.Joyce also notes that the services DTS included in the solicitation are not new to federal travel contractors. "The solicitation's requirements are the same whether they are performed through traditional means or the automated DTS means," he says."Also, the government, when structuring the RFP, employed every possible measure to reduce any cost impacts to the offerors."

Joyce says a new solicitation should be ready late this year. Contractors' lawyer Anderson expects DTS officials will have an easier time crafting the new RFP. "This is a new system . . . and hasn't been tested yet," says Anderson. "Presumably when they start over sometime in the fall they'll have some experience testing this thing. They'll have some good information."

To read the General Accounting Office decision go to www.gao.gov/decisions/bidpro/292101.htm.