Categorically Speaking: DTMO Category Management Initiatives
The President’s Management Agenda lays out the long-term vision for modernizing the federal government. That vision prioritizes outcomes, service delivery, and effective stewardship of taxpayer dollars. An important cog in achieving that vision is category management, which focuses on procuring goods and services by applying an approach that buys smarter and leverages the immense buying power of the federal government as a whole. As a procurement strategy, category management has been around in the private sector for decades and the government is finally catching up.
In 2019, the Office of Management and Budget (OMB) issued OMB M-19-13, “Category Management: Making Smarter Use of Common Contract Solutions and Practices,” which provides guidance on implementing category management, including the increased use of Best-in-Class (BIC) procurement solutions.
One of the “categories” identified by OMB for improved management is travel. The Director of Travel and Transportation Services at the General Services Administration (GSA), Mr. Timothy Burke, serves as the OMB-designated Government-wide Category Executive for Travel and Lodging. Mr. Bill Mansell, the Director of the DTMO, has forged a partnership with Mr. Burke to further a government-wide approach to procuring travel with this “buy as one” tactic. The results of this growing partnership reflect both the vision of the President’s Management Agenda and OMB’s direction to make smarter use of common contract solutions and practices, which includes some OMB-designated BIC solutions.
The Department of Defense’s (DOD) $10 billion travel enterprise packs quite the punch in leveraging buying power to deliver value to its customers. More than 60 percent of the federal government’s travel spend is attributed to the travel of DOD service members, civilian employees, and their families. Leveraging that substantial buying power has been integral to its strategy since the inception of DTMO in 2006. By centralizing travel functions under one organization, the Department is able to standardize management practices, leverage economies of scale, reduce administrative costs, and work towards a common set of goals with an established governance framework for managing travel. As a result, DTMO is able to bring to bear DOD’s buying power to avoid costs, secure traveler amenities, and deliver an overall better travel experience.
DTMO manages its DOD travel programs through an integrated management model that combines strategy, operations, policy, governance, programs, and systems in order to reduce the cost of travel. Having all of these functions under one organization is somewhat unique within the government. The result is a unity of command and level of cross-functional collaboration that facilitates initiatives like category management. This integrated approach also requires customer input and relies on data science capabilities to drive evidence-based decision-making to improve programs, modernize technology, and strategically source travel services, driving down the costs of travel.
DTMO embraces the government-wide category management mandate to more fully employ strategic sourcing and other methods to better meet requirements while generating savings for the DOD. It continues to expand its use of category management strategies in the procurement of travel and travel-related services, working in collaboration with GSA and other agency partners to create value for its customers and stakeholders.
OMB defines BIC as contract solutions that satisfy key criteria and are available for government-wide use. BIC contracts are well-managed procurement solutions that include mature, tested business processes and data sharing. When used across government, these solutions create efficiency by reducing the number of contracts needed and minimizing the administrative overhead to manage them. They enable standardization in business processes and facilitate the collection of data. Better data enables evidence-based decision-making and the creation of business intelligence to further leverage the government’s buying power to avoid costs. DTMO has two programs that are under the BIC umbrella—DOD Preferred Commercial Lodging, which is part of the government-wide lodging contract, a GSA-DOD joint effort, and the US Government Rental Car Program.
DOD Preferred Commercial Lodging
DOD Preferred uses extensive market analysis, rigorous duty of care requirements, and annual site inspections to ensure participating commercial lodging locations are above standard. DOD Preferred is known for exceptional quality—83 percent of the participating hotels are three or four Diamond rated by AAA, and all hotels must meet stringent quality standards. Hotels are required to bid at least 10 percent below per diem rate in order to participate. The 2020 program’s average negotiated rates are ty 85.6 percent of the per diem allotted to travelers. In Integrated Lodging Pilot sites that include DOD Preferred commercial hotels, DOD travel systems are designed to direct travelers to DOD Preferred commercial hotels and, by policy, limit travelers’ lodging reimbursement to what it would have cost the government if travelers choose to stay elsewhere (unless an exception applies and is approved by the authorizing official). Hotels must reapply every year for acceptance into this competitively sourced program. For quality assurance, DTMO collects direct feedback from travelers about their stay and DTMO personnel conduct in-person site visits. Customer satisfaction with DOD Preferred properties remains high at 87 percent. DTMO estimates the DOD Preferred Commercial Lodging Program avoided the Department $16.1M in lodging costs in the fiscal year 2020.
US Government Rental Car Program
DTMO manages the US Government Rental Car Program, an OMB BIC solution, which provides rental vehicles for all of the federal government. It offers reduced rates and special benefits when renting vehicles through a variety of approved rental car companies. The program is open to federal government employees and military service members traveling on official business. Program benefits include Loss Damage Waiver (LDW)/Collision Damage Waiver (CDW) and supplemental liability insurance at no additional cost; free upgrades when the size/class vehicle reserved is not available; unlimited mileage; no blackout periods; and established “not to exceed” ceiling rates.
This single program for all of the federal government saves the government money with a competitive pricing model at the point-of-sale. Competitive sourcing built into the Defense Travel System (DTS) enables participating vendors to compete for the patronage of government travelers. And, because DOD policy requires travelers to use the lowest cost rental car available, the best-priced vendor will receive the most business. DTMO is currently drafting a new rental car agreement, with the goal of providing even more comprehensive service and value to government travelers. Proposed changes include additional data reporting requirements from participating vendors, increased cost protections for travelers, and additional duty of care elements. DTMO projects the US Government Rental Car Program will produce cost avoidance of $62M for DOD in the fiscal year 2020.
One of DTMO’s current strategic initiatives is an acquisition strategy for Travel Management Company (TMC) services with two goals: (1) realign the current TMC contract footprint to reduce redundancy and administrative costs, and (2) develop a way ahead that supports DOD Travel System Modernization. Over the years, DTMO has made tremendous strides in consolidating the Department’s multitude of TMC service contracts. In 2007, DOD maintained 100 contracts managed by 50 organizations. Recently DTMO reduced the number of contracts to 22. By 2021, the Department will have 12 total TMC contracts with only two contracting offices managing them. With this most recent realignment, nine large business contracts will be managed by GSA—the result of an evolving DTMO-GSA partnership. This approach exemplifies OMB’s directive to make smarter use of common contract solutions. The small business TMC, historically a strong DOD stakeholder, remains integral to DTMO’s TMC acquisition strategy. The Defense Human Resources Activity, DTMO’s parent organization, will manage three small business TMC contracts.
With Defense Travel Modernization underway, DOD will take an even more forward-leaning approach to develop an acquisition strategy that is cost-effective and will meet DOD’s future TMC support requirements as the Department transitions to a next-generation travel system. That strategy will transfer TMC responsibility to the prime contractor of the commercial Software as a Service (SaaS) travel system, who selects and manages its TMC partners. Once the new system is fully deployed, this strategy will allow DTMO to further reduce its TMC contract footprint and achieve additional efficiencies in acquisition and contract management costs.
DOD Dine Smart Preferred Dining Program
The second-largest expense for government travelers is Meals and Incidental Expenses (M&IE), roughly 28 percent of the total cost of travel. It is no surprise that the DOD launched a preferred dining program in 2018, DOD Dine Smart. It operates through Dinova, a dining marketplace, using a no-cost, fee-based contract that generates rebates for the Department when travelers use their Government Travel Charge Card (GTCC) to pay for meals at participating restaurants. These rebates are in addition to the rebates already earned through the GTCC program. Since travelers are required by DOD policy to use their GTCC to pay for all official travel expenses including meals, participation is easy and automatic. Still in its pilot phase, the preferred dining program has earned over $394,000, with the 3-5 percent rebates going back to the Services to support travel budgets. The increased use of the GTCC also provides richer data on travelers’ M&IE, providing better insight into traveler behavior that can be used to leverage other strategic sourcing opportunities.
New and Improved DOD Bus Program
A relatively unknown program, the DOD Bus Program ensures that commercial bus, van, and limousine companies offering charter service provide safe vehicles that consistently meet DOD standards of service. Almost 400 carriers currently participate in the program, offering ground transportation to individual and group DOD passengers, including military movements and recruit travel.
DTMO manages the program through an agreement with carriers that establishes the specific terms, conditions, and standards that must be met when providing transportation for DOD passengers. Transportation Coordinators and individuals arranging DOD-sponsored passenger travel must use DOD-approved carriers to arrange for transportation within their routing authority. Under the new DOD Bus Agreement #5, all carriers must be registered in GOPAX to bid. Consolidating all of the bidding carriers and all requests in GOPAX allows for more competitive bids on bus moves and provides the carriers the potential for more business since all open requests are easy to bid and in one place. GOPAX data also allows program administrators to see where needs are and work to ensure carriers can support the needs of all personnel making bus movements.
CUSTOMER FOCUSED RESULTS
The Defense Travel Management Office is focused on doing its part to procure goods and services by applying an approach that buys smarter and leverages the immense buying power of the Department. But it is also focused on its customers—the more than 2 million travelers circling the globe in defense of the nation. By strategically sourcing commercial travel services like lodging, dining, rental car, bus, and Travel Management Company support, the Department not only achieves additional cost savings, but also secures more traveler amenities, and delivers an overall better experience for our travelers. DTMO is focused on achieving measurable results that demonstrate value to DOD, the taxpayer, and, most importantly, to the Defense traveler.
By Betsey Grundy & Elizabeth Blake, Defense Travel Management Office (DTMO)