New relocation program may cost more than Pentagon estimates

The Defense Department's cost estimates for implementing its new relocation program may not accurately reflect the cost of getting the program up and running, according to a new report from the General Accounting Office.

Each year, the Defense Department moves more than 600,000 service members and civilians, and spends approximately $1.7 billion doing it. But that service has been riddled with complaints from those who use it, and 10 years ago Pentagon officials decided to study ways to change and improve it. Last fall, after several pilot programs and other studies, the U.S. Transportation Command, which oversees relocation services, sent recommendations for a new program to Congress. The resulting "Families First" relocation program is scheduled to start in 2004, and will focus on increasing communication, reducing damage and loss claims, and expanding the number of direct moves.

The 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. It also includes higher liability payments for the full replacement value of lost or damaged goods and streamlined claims processing.

But the new program will cost an estimated 13 percent more than the current relocation program and in its report (03-367), GAO found that Defense officials did not include in that estimate the costs of monitoring the program during its implementation phase or the costs of developing technology to expedite claims processing.

"Based on our discussions with Military Traffic Management Command officials and review of available documents, we concluded that the total initial cost to implement the information technology improvements recommendation will more likely be $7 million rather than the $4 million to $6 million estimate that DoD previously reported to Congress," the report said.

While Defense officials may have been conservative in their estimates, GAO found that it would be hard to determine if the estimated 13 percent cost increase was reasonable or if that projection would pay for the planned program upgrades.

"This information is important to the military services as they develop their military personnel, and operations and maintenance budget requests, and to Congress as it assesses the reasonableness of these requests," the report said.

GAO recommended that Defense officials find ways to make the program improvements within the allotted budget, which includes the 13 percent cost increase; provide more information to Congress and the military installations so they can make budget decisions; and monitor the costs for all the changes during the implementation phase to ensure that the proposed changes are being achieved at an acceptable cost.

In a written response to GAO, Defense officials defended their cost estimates.

"The [Defense Department] continues to believe that the factors used in developing its projected cost estimate for the claims process and performance-based contract recommendations are supportable and the new program can be implemented within the projected 13 percent increase over current program costs," wrote Allen Beckett, principal assistant in the Defense logistics and materiel readiness office, in the department's response to GAO.