01-27863. MTMC Pam 55-4 “How to do Business in the DOD Personal Property Program”. Defense Transportation Regulation Part IV; Tender of Service

AGENCY:

Military Traffic Management Command (MTMC), DoD.

ACTION:

Notice; Request for comments

SUMMARY:

New Procedures to participate in the Department of Defense Personal Property Program. MTMC, as Program Manager of the Department of Defense (DOD) Personal Property Shipment and Storage Program (the Program), proposes to streamline and strengthen the carrier qualification process. The proposal requires all present and future participants (commercial carriers) in the Domestic and International Personal Property Programs to use our streamlined qualification process via the web, email, fax, and met more stringent financial requirements. These changes in procedures will:

a. Simplify and streamline the carriers qualification process by reducing paperwork and expediting approval processing time.

b. Meet MTMC's legal obligation to only do business with responsible commercial carriers.

c. Improve Program performance and quality assurance.

d. Incorporate suggestions made by our industry partners.

For streamlining MTMC is proposing the following procedures.

a. Present participants will be required to re-quality using the new procedures.

b. Future applicants will be required to use the new procedures.

c. Reducing from 13 previously required manual forms to 4 electronic forms.

These 4 forms include the electronic submission of the Tender of Service Signature Sheet, the list of countries and codes of service form, the performance bond (electronic or fax), and the certificate of cargo liability (electronic or fax).

For strengthening MTMC is proposing the following changes.

a. Current participants must comply with the new re-qualification procedures/standards.

b. Financial requirements will be increased.

c. Carriers must provide, upon request, financial statements, audit report or review memorandum, and income tax returns.

d. Cargo liability insurance minimums will be increased.

e. Performance bonds will be required in both the international and domestic programs.

f. Five years government and/or commercial experience will be required, using the date on the operating authority or if the state is deregulated, the articles of incorporation date.

g. MTMC will use carriers's safety rating obtained from SAFER system, Department of Transportation (DOT) for verification of authority and any reported safety infractions, which may be used in Carrier Review Boards.

h. Change in company ownership applications will go through a novation process.

DATES:

Comments on these proposed procedural changes and standards must be submitted to the address given below on or before January 7, 2002.

FOR FURTHER INFORMATION CONTACT:

Ms. Sylvia Walker Headquarters, Military Traffic Management Command, ATTN: MTPP-HQ, Room 10N67-51, Hoffman Building II, 200 Stovall Street, Alexandria, Virginia 22332-5000; Telephone [phone]; Telefax [phone]/3389.

SUPPLEMENTARY INFORMATION:

MTMC's proposal to incorporate common commercial business practices and take advantage of efficiencies gained from the use of technology will streamline and strengthen the carrier qualification process for the first time in 10 years. Once changes have been adopted, the new requirements will supersede the current How To Do Business Book. The updated “book” will be available for your use on the internet on the MTMC home page at www.mtmc.army.mil.

Streamlining Initiatives

1. Qualification procedures.

Current: Manual and time consuming submission of documentation to MTMC.

Proposed: All current Program participants and those who have applied for qualification prior to the publication of this notice in the Federal Register must apply or re-apply for qualification approval (also known as re-qualification) under the new streamlined requirements and submit their application electronically for two forms and electronic/fax for two specific forms.

2. New procedures for future applicants.

Current: Utilizes “How to do Business Book”

Proposed: Once published, carriers must comply with the new procedures in the revised “How to do Business Book”.

3. Submission of Forms.

Current: Submission of a qualification package is a manual process with a minimum of 13 forms.

Proposed: MTMC will require only 2 electronic forms and 2 forms that either contain electronic signatures or are faxed facsimile signatures. All forms will be available on the MTMC web site. These forms include the Electronic Tender of Service Signature Sheet, the List of Countries and Codes of Service form, performance bond, and certificate of cargo liability insurance as part of the approval process. The performance bond and certificate of cargo liability require signatures and must be sent electronically or faxed.

Note:

Requirements for accessing the Personal Property Qualification website are: Carrier must have access to the Internet via a Web Browser, Microsoft Internet Explorer version 5.5 or greater, or Netscape version 4.75 or greater. The minimum Personal Computer requirements recommended: Intel Pentium processor (or other IBM compatible), 400 MHz or greater speed, at least 128 MB of RAM and Windows 98/Windows NT 4.0/windows 2000.

Strengthening Initiative

1. Application for re-qualification.

Current: Manual applications are reviewed on a first come first served basis.

Proposed: Required electronic re-qualification applications must be submitted during the period 1 Feb.-1 Mar. 02. The submission date is determined by the electronic date on the electronic tender of service signature sheet received in MTMC's database. After completing the electronic tender of service signature sheet and the List of countries and codes of service the computer will send back a response that we have received the documentation. It will be the carrier's responsibility to ensure any faxed documentation has been submitted to MTMC by the required deadline. Late submissions will not be accepted. Electronic applications will be reviewed on a first come first served basis. During the transition period while applications for re-qualification are being processed, previously approved carrier applicants may continue to do business with DOD pending completion of the re-qualification process. Before filing rates for the IS02/DS02 cycles, carriers should review the final Federal Register notice in Jan 02 to make sure they meet the new qualification requirements. Upon MTMC's review of applicant's submission, if carriers do not meet the qualification requirements, their rates will be administratively removed from the system. Carriers failing to successfully complete the required re-qualification process during the submission period will be allowed to continue to participate in the current winter cycle but will be ineligible for traffic in succeeding cycles. Future applicants must qualify under the new qualification procedures.

2. Financial Ratios.

Current: Carriers must certify financial statements meets a 1:1 quick ratio or better.

Proposed: All participants must meet and maintain a 1:1 Quick ratio or better, a 1:1 Current ratio or better, and a 2:1 Debt to Equity ratio or less. The following definitions are provided for clarification purposes only. If there are further questions, carriers should consult with their own accountants for clarification and how to best present financial data.

The quick ratio measures the ability of a business to meet their current bills. Quick ratio is cash plus receivable/current liabilities. This is similar to current ratio with the exception that inventory and prepaids are subtracted from the total current assets prior to making the computation. These items are deleted prior to computing the ratio because inventory and prepaids are not easily converted to cash to pay debts. Future if a company needs to liquidate inventory or prepaids to pay bills, they are in liquidation process and not really a going concern.

Current ratio is company's current assets/current liabilities. Current assets are defined as cash, receivables, inventories, and prepaid items (insurance, deposits, etc). Current liabilities are what you owe within the coming 12 month period. Included as current liabilities are normal accounts payable and next 12 months of payments on company loans/note payable.

Debt to equity is total liabilities divided by company's equity. Another way of stating this is that equity is the company's worth and debt to equity measures debt to worth. For example if your car costs $15,000 but your loan is $10,000 your equity in the car is $5,000 and your debt to equity ratio is 2 to 1. Thus for every dollar of equity you owe two dollars. (2 × 5,000 equals your debt of $10,000).

3. Financial documentation.

Current: Submit hard copy of financial statements at time of application.

Proposed: Upon request, carriers will provide MTMC financial statements accompanied by either an audit report or review memorandum prepared by their auditors. Financial statements must be prepared according to generally accepted accounting principles using the accrual basis, including balance sheets and profit/loss statements. Financial statements must include all documents referenced in any footnotes or in any audit or review memorandums. No pro forma statements will be accepted in lieu of actual financial statements. We may also elect to request copies of your company income tax returns for the past three years. MTMC reserves the right to obtain services from an independent third party source to conduct financial risk analysis of carrier's financials. This analysis will compare the company analyzed with appropriate industry norms. This information may be used in a carrier review board action to assist in the determination of financial risk to the government. The financial statements must document the business operations of the single business entity or organization that seeks to qualify to do business with the DOD. Combined or consolidated statements that include the finances of other companies will not be accepted. Letters of guarantee from a parent company will not be accepted.

4. Cargo Liability Insurance Minimum.

Current: Minimums are $10,800 per shipment and $150,000 amount per aggregate at any one place and time (per incident).

Proposed: Cargo liability insurance will be equal to $22,500 per shipment and $315,000 per incident. Carriers must have their insurance company provide directly to MTMC current cargo liability insurance certificates by electronic means or fax. These levels must be maintained throughout DOD approval.

5. Performance Bond.

Current: International carriers must provide a performance bond in the face amount of either $100,000 or 2.5% of their DOD international revenue for the previous year, whichever, is greater. There is no current bond requirement in the Domestic program.

Proposed: Carriers must have their surety company provide a signed copy of their performance bond directly to MTMC electronically or by fax. A performance bond will be required in both the international and domestic program. However, there are differences in the requirements. The value of each cycle's International Program continuous performance bond must be equal to $100,000 or 2.5% percent of the projected international revenue based on previous year cycle data, whichever is greater. The International bond requirement will change from an annual submission to a semi-annual submission, upon request from MTMC. Note: For the purpose of re-qualification, all current International participants will be notified individually, if an increase in their performance bond is required.

The value of the continuous Domestic bond will be equal to $50,000 or 2.5% percent of the value of revenue received from DOD personal property domestic traffic in the previous complete calendar year, whichever is greater.

Note:

Because no bond was previously required for the purpose of re-qualification, all domestic carriers must submit a performance bond in the minimum amount of $50,000. MTMC will then contact each individual Domestic carrier at a later time to request an increased bond (if applicable).

The purpose of this performance bond requirement is to ensure that the DOD is compensated for reprocurement costs caused by the carrier's failure to perform agreed services.

6. Carrier experience requirement.

Current: There is no minimum.

Proposed: Both International and Domestic carriers must have a minimum of 5 years commercial and/or government experience to be considered for DOD approval, using the date on your operating authority, or if deregulated the date on your Articles of Incorporation.

7. Safety Rating.

Current: Carrier's Safety Rating is not reviewed.

Proposed: MTMC will reserve the right to obtain and use a carrier's Department of Transportation Safety Rating for verification of authority and any reported safety infractions, which may be used in Carrier Review Boards.

8. Change of Ownership.

Current: Carrier submits new qualification package.

Proposed: MTMC approval of changes in ownership of previously approved carriers is required. MTMC approval will be based on a review of the sales agreement and other items similar to that set out in the Federal Acquisition Regulation subpart 42.12. The new asset owner (transferee) must assume ALL obligations under the agreement as if they were the original party. The transferor guarantees performance by the transferee. All three parties (Government, transferor, and transferee) will sign a novation agreement.

Additional Information

1. For all Domestic Program applicants and participants, MTMC proposes to continue to require all affiliates of other Domestic and International Program applicants and participants to declare (common financial and/or administrative control) their affiliations. Affiliates means associated business concerns or individuals if directly or indirectly, (a) either one controls or can control the other or (b) a third party controls or can control both. For all International Program applicants and participants, MTMC proposes to continue to require all affiliates of the other Domestic and International Program applicants and participants to both declare their affiliations to MTMC, and to refrain from competing in the same personal property code of service/channel (code/channel) combinations served by any of their affiliates. If MTMC adjusts the codes of service and/or channels at any time in the future, this rule will continue for the new or altered codes and/or channels without further notice, and Program participants will be required to adjust their service and update their documentation with MTMC.

2. MTMC intends to enforce these enhanced qualification requirements by reviewing information about commercial participant performance and finances obtained from a variety of sources including information provided directly to MTMC, public databases, and commercial sources. The latter may include commercial performance databases, members of the personal property industry, and members of the general public. If a Program participant violates Program requirements, it will be administratively placed in a nonuse status pending resolution of the violation using the procedures contained in MTMC Regulations 15-1. When carrier declarations do not appear to be consistent with known factors or circumstances, they will be identified for further investigation and possible referral to the U.S. Justice Department for action.

3. MTMC proposes to require that all Program applicants and participants accept the cost of complying with these more stringent requirements as part of their cost of doing business. We further anticipate that adoption of the new qualification procedures and standards will result in many offsetting tangible and intangible benefits to military service members and their families, the personal property industry, to DOD, the military services, U.S. Transportation Command, and MTMC as organizations. Military service members will benefit from having their personal property moved in an efficient manner by carriers that possess the necessary means of doing business and that do not go out of business and/or hold shipments hostage. Personal property agents will benefit from knowing that a DOD approved carrier is financially stable and has the means to pay its bills in a timely manner. DOD organizations will benefit from dealing with healthy carriers that do not suffer catastrophic business failures that require extensive and expensive transportation reprocurement efforts.

MTMC envisions the adoption of more stringent qualification requirements as part of a continuing process in which MTMC moves from price-based procurement of transportation services to a best value, or quality plus price, approach.

The revised qualification process, procedures, regulations and How To Do Business Book will be superseded by the new streamlined requirements. MTMC will publish all Program requirements in its Website “How to Do Business with the DOD”, and the Federal Register as appropriate.

MTMC has previously received many informal comments, primarily from commercial personal property transportation providers supporting the idea of eliminating financially and operationally risky carriers from the Program. We agree in general terms with these comments for both legal and operational reasons. We now propose to change carrier qualification requirement in the DOD Personal Property Program to implement this military/industry consensus.

Paperwork Reduction Act

The Paperwork Reduction Act, 44 U.S.C. 3501 et seq., does not apply because no information requirements or records keeping responsibilities are imposed on offerors, contractors, or members of the public.

Regulatory Flexibility Act

This change is related to public contracts and is designed to streamline and strengthen the DOD personal property carrier qualification program. This change is not considered rule making within the meaning of the Regulatory Flexibility Act, 5, U.S.C. 601-612.

Luz D. Ortiz,

Army Federal Register Liaison Officer.