¨ While Industry, Congress and DoD all agree for the need to improve the quality of the moving service to our military members, it is also important that the final program implemented by DoD not destroy those elements of the existing infrastructure that have consistently provided quality service to our military members. Small business has been such a recognized asset in the program that Congress has taken great pains to ensure its continued presence in the program.

¨ The federal government has developed three pilot programs that will destroy the small and medium sized businesses in the moving industry. These pilot programs are detrimental to the small businesses which make up a majority of the industry (85%) because small businesses will be unable to compete as prime contractors and in many cases even as subcontractors under the pilot program.

¨ Over the last four years, Congress repeatedly asked DoD and MTMC to assess the impact that any pilot program would have on small businesses before commencing with the pilot. DoD and MTMC have ignored virtually every Congressional directive to address the concerns of small business during this process. Because small business represents over 85% of the existing industry, many members of Congress have expressed deep concerns about the impact that DoD and MTMC's proposed pilot program will have on America's small businesses.

¨ Even those movers who only do commercial business will be impacted by the pilot program because those businesses losing out of the government market will seek greater entry into the already tight commercial markets. Additionally, the buying power of small businesses throughout the industry will be reduced by the increased control the large carriers and paper companies (such as relocation firms) will now be able to exert in the marketplace because of their command of the government market which make up 12-15% of the overall household goods market.

¨ The industry alternative proposal offered for Congress' consideration encourage competition, preserve the needed infrastructure, furnish all the hallmarks of good service established by DoD and MTMC, allows for the elimination of poor quality carriers from the program, maintains capacity, allows for administrative outsourcing, encourage participation by high-quality small business concerns, and reward carriers who furnish quality service. Industry's alternative proposal provide for more objective standards in awarding contracts and could be implemented in a few short months.

¨ The reengineering programs developed by DoD and MTMC within the Department of Defense will eliminate almost all of the small and medium sized companies within the relocation industry through Contract Bundling. These companies will be eliminated because the programs designed by DoD bundle both the service requirements provided (i.e., domestic & international, household goods and baggage) and the areas of responsibility to be served which are contrary to existing commercial moving practices. Small and many medium sized businesses do not have the resources to bid nor administer a program bundled in this manner.

¨ Industry points out the impact of the Hunter Army Airfield pilot project as an indication of what the DoD FSMP project will produce. At Hunter Army Airfield, the average cost of a move under existing practices is approximately $2,641. Under the new contract which was awarded to a company with no vans, warehouses, agents or forwarders (i.e., CENDANT), the average cost of a move has increased to $7,000 per move. The Army's projected cost of $21.1 million for all service relocation moves around the world has been overspent at a single installation (Hunter). The Hunter contract has cost the Army $22.5 million for three years.

¨ DoD maintains that the reason for re-engineering is because of the poor quality of service afforded military families allegedly evidenced by claims rates that are higher than the commercial sector. In reality, our members desperately need relief from a claims system that is seriously flawed. The claims rates for military moves generally parallels the claims rates for commercial moves.

However, there are some notable differences between the military and commercial sectors. There is a six-year statute of limitations on military claims versus nine months in the commercial sector; The military manual for movement of household goods actively encourages the fraudulent filing of claims. Such activity in the commercial sector is illegal.

The military can capriciously access the bank accounts of the moving contractor if a claims dispute is unresolved. In the commercial sector such actions would violate all due process provisions of law. There is no due process for claims disputes in the military. DoD can arbitrarily deduct money directly from a contractor's account. All independent studies have shown that military and commercial claims rates are identical. Industry seeks Congressional support for legislation to bring the claims process in line with commercial business practices.

¨ The DoD maintains that re-engineering will create the best services and most competitive prices. Neither will happen because the elimination of almost all small and medium sized businesses will reduce, not encourage competition. A reduction in competition cannot stimulate a higher level of service nor more competitive pricing. In addition, the elimination of these companies will adversely affect the capacity that is currently in short-supply during the peak of the moving season which is April through October.

Despite DoD claims, there will no subcontracting developed as a result of the re-engineering program. In fact, a small business subcontracting plan will most likely fail to stimulate any additional competition. There will be no competitive positioning nor pricing because all subcontracting will only be done within the corporate families of the major moving companies. A major van line will not subcontract outside its family network. DoD's reengineering programs act as a catalyst to eliminate small and medium sized businesses.