By Travis Tritten – July 10 2019/ Bloomberg
- Award early next year for $2.2 billion annual program
- Congress eyeing legislation that could delay contract
Nothing is more certain in military life than that moving, at some point, will be part of it.
That saddles the Pentagon with managing an army of commercial moving companies for about 360,000 shipments per year of furniture, clothes, books, bicycles, and all other types of personal belongings. It makes the military the biggest force in domestic long-haul moving, accounting for about 20 percent of the market.
But after years of hearing troops complain about poor service, highlighted by a recent online petition that got more than 100,000 signatures, the Pentagon wants out. It’s planning to bid out management of the program early next year in a private contract worth $2.2 billion annually.
Major movers are contemplating an unprecedented business opportunity. But hundreds of other smaller companies are deeply worried they will be pushed out of a potentially reordered industry. Their lobbying has gotten the attention of Congress, which is considering legislation in annual defense bills that could slow the Pentagon’s plans.
“If this change goes through in something similar to the way it is being developed today it will completely restructure the way the industry is arranged and how those relationships are set up,” said Scott Michael, president and CEO of the American Moving and Storage Association, a trade group with 3,400 members.
“The industry was really built on military business and structured around that,” Michael said. His group spent $40,000 on lobbying that included the issue during the first quarter of this year, according to Senate records.
Too Many Complaints
The Pentagon now works directly with about 900 transportation service providers vetted to do troop moves, under oversight of U.S. Transportation Command. Each move is arranged individually with different companies, managed by a network of 42 offices run by the military services and 300 counseling offices at bases around the world.
Moves surge during the summer when children are out of school and war colleges are between terms. About 40% occur between mid-May and the end of August, straining the Pentagon and moving companies, which attempt to quickly hire extra and sometimes unskilled help to keep up.
Troop complaints of lost and damaged belongings balloon during those months. About 10% of personnel report they are unsatisfied with moving services, but that climbs to 20% during the peak periods, according to the Transportation Command.
This summer has already been particularly trying for troops due to a “perfect storm” of many moves, a good economy making it hard for movers to hire packers, and ongoing problems with the military’s privatized housing, said Kelly Hruska, government relations director for the nonprofit National Military Family Association.
The Pentagon’s plan would put a single contractor in charge of managing moves. A request for proposals is slated for August and a final contract agreement is expected in January.
“We have learned over the years that this program can and should be improved in order to generate more reliable capacity and quality throughout the year, and the transactional relationship we have with industry today was not getting us to what we need,” said Rear Adm. Peter Clarke, the director of strategy, policy, programs, and logistics for U.S. Transportation Command.
Clarke said the goal is to get dissatisfaction rates to 5% or lower. To do it, the military must leverage its huge influence on the moving market to improve service, something it has not been able to do through the current system.
“We should be able to demand from industry the quality [and] capacity across the year that is commensurate with 20% of the entire household goods industry across the nation,” he said.
A sole contractor managing the system would be able to do that by more efficiently managing the vast network of companies and making investments to fill gaps in capacity, Clarke said.
The potential contract drew dozens of interested moving companies to an industry day earlier this year, including Suddath Cos., Atlas Van Lines Inc., Hapag-Lloyd USA, and SIRVA Inc.
“Although there are still many details to be worked out, we recognize the potential for a privatized system to provide clearer accountability and build in the flexibility to solve problems and improve the customer experience,” Scott Kelly, president of Suddath Government Services, said in a statement to Bloomberg Government.
The overhaul has many smaller companies who make up the bulk of the industry worried, according to Michael’s trade group and the International Association of Movers, another trade group with about 2,100 members.
“There is a class of entities that are uniformly opposed to this because they see their role being eliminated by this process,” Michael said.
Freight forwarders that handle overseas moves are feeling most threatened. About 170 of them work with the military to arrange agents to pack belongings for shipment, trucking to ocean ports, customs clearance, and final delivery when troops move to places such as Germany and Japan.
A single managing contractor, likely a consortium of large movers, could take over those roles and push out those companies, said Chuck White, president of the International Association of Movers.
“We just see the demise of many, many small businesses that have the expertise and ability to work in this program, and many have worked for decades in the program. Under this contracting initiative we just feel they will be thrown to the side,” White said.
Clarke, of U.S. Transportation Command, said a “handful of companies are going to lose out” but there is no evidence the contract would change the industry’s reliance on a wide variety of companies. Over the past nine months, the Pentagon has won “overwhelming” support, he said.
When Gen. Steve Lyons, the head of U.S. Transportation Command, testified about the planned contract earlier this year, lawmakers on both the House and Senate armed services panels raised comparisons to the military’s ill-fated privatization of troop housing that’s been mired in scandal over poor management and lead, mold, and vermin infestations.
Lyons insisted that “there is no plan to privatize” the household goods moves because the system is already dependent on industry and oversight will continue under a contractor.
Still, the Senate passed a measure in its annual defense authorization bill last month that would direct the Pentagon to hold off on the moving contract until the Government Accountability Office completes a study of the issue.
The House version of the bill, which is slated to be on the chamber floor this week, doesn’t go as far. The Armed Services Committee acknowledged the complaints about poor service but only asked for a Pentagon report on the plans by December and that U.S. Transportation Command push its request for proposals to August, which it has already done.
But Rep. Doug Lamborn (R-Colo.), the ranking member on the Armed Services Readiness Subcomittee, has filed a proposed amendment to the House’s defense authorization bill that would add the Senate’s requirements for a GAO study before making the change.
“I completely understand their reasoning for pursuing this course of action, and agree that change is necessary,” Lamborn said in a statement. “However, I am concerned that moving too quickly without thorough analysis may do more harm than good.”
Final bill language would have to be worked out in a House and Senate conference committee, likely later this summer or fall.
Clarke said any new legislation isn’t likely to derail the plans. The GAO is already planning to publish a study of the household goods shipments by February and he is confident the results will match the Pentagon’s own position on the issue, he said.
“It could delay it a few months. We don’t see that the ultimate goal of the prime contractor managing the program fully by peak season of 2021 is at risk right now,” Clarke said.