What happens when the government finally develops a program to save $50 million by requiring competitive bidding for firms that want to ship household goods overseas for the armed services personnel?
Congress tries to kill it, of course.
"This is nothing but a raid on the treasury of the United States," says Rep. Paul McClosky (R-Calif.) who is supporting an amandement to the Defense Appropriations bill that would allow the Department of Defense to expand the competitive bidding process, not curtail it, as present language would do.
In 1975 the Department of Defense began competitive bidding for household good movements to Okinawa and Germany under what is known as the Competitive Rate Program, which continued despite an effort in May, 1976, by the Household Freight Forwarders Association to get the House Merchant Marine Committee to stop the program.
Prior to that time, shipment of household goods overseas were awarded under what is called the "me too" system, where any shipper who would meet the lowest rate already bid would share equally in the total shipments.
But the low rates became increasingily higher as participating carriers were sharing the $250 million in annual shipping business. And there was no incentive for a bidder to go lower than the lowest existing rate, because the shipper could get his share of the pie at the existing rates by just asking.
A Department of Defense fact sheet on household goods movements compiled last week says that implementation of the CRP program so far saved the government $34 million.
After the program began in January 1975, for shipments to Okinawa, "rates dropped immediately from $58.15 per hundredweight to $46.87. Savings to date: $6.1 million," the DOD report states.
On May 6, 1976 the General Accounting Office issued a report indicating that freight forwarders profits on over 70 percent of the foreign shipments under the traditional "me too" program were more than twice the profits considered reasonable by the Interstate Commerce Commission for domestic-regulated shipments.
On Nov. 1, 1976, the DOD expanded the competitive program from Okinawa to Germany. "Rates droped immediately freom $66.49 to $46.25," the DOD reports, "Savings to date: $27.9 million."
In January, 1978, the Merchant Marine Subcommittee of the House held hearings on the CRP program. held hearings on the CRP program. Would, when fully expanded, save the taxpayers an estimated $50 million.
In addition, DOD reported that the program had improved service by reducing the average shipping time by 5 percent, and having delivery dates met 88 percent of the time instead of the 57 percent figure under the "me too" system. And, DOD said, the number of small businesses participating in overseas household goods movements jumped from 9 to 53, with the small business share of total revenue jumping from 23 percent to 35 percent.
But Rep John Murphy ;D.N.Y.), chairman of the Merchant Marine and Fisheries Committee was skeptical of DOD's figures and asked the GAO to validate them.
Last February the freight forwarders went to court to try and prevent expansion of the CRP program to new areas. They lost.But they have, in what McCloskey calls "an end run," succeeded in getting the House and Senate Appropriations Committees to include language in their military appropriations bills that would prevent DOD from using any news funds to expand the program.
Meanwhile, last May, the military exapnded CRP to Guam, Italy, the Philippines, Sicily and parts of the United Kingdom - with a resulting immediate drop of 29.2 percent in the rates, according to DOD.
And early last month the GAO reported that "our preliminary evaluation indicates that the Department's estimate of savings and methodology used is sound," but that the second phase of the study could not be completed since freight forwarders refused to make their records available to government inspectors.
The added savings to the government, should the CRP program be permanently extended to Alaska, Hawaii and the new areas that were temporarily added on May 1, would be about $14.1 million, according to DOD.
"We are thus in the novel position of being asked to impose a $14 million cost to the Defense budget in order to prevent competitive bidding procedures being imposed on a group of defense contractors who won't let the GAO look at their records," said McCloskey in a letter this week to Republican Policy Committee members. "I think this is outrageous."
"I can't remember a special interest rip-off bill as bad as this one." McCloskey adds, "unless maybe it was Cargo Preference."
For their part, the freight forwarders claim that under CRP the large firms will move in, undercut the small mover, and then later boost prices up.
But as Deputy Assistant Secretary of Defense Paul H. Riley told the publication Army Times last month:
"We have no obligation to keep these guys in business. I don't understand how they got so much clout in Congress. Every time we have tried to improve household goods shipping, this industry has fought us."