UNITED STATES GOVZRNh4EW

Agency decision

Ask Donna

What actually matters in this document.

Text

GENERAL ACCOUNTING OFFICE

Memorandum

MAR 2 6 1984

THRU

Comptroller General

General Counsel

FROM

Director, NSIAD - Prank C. Conahan

1l11llIII111l1l 111111111III11 11

i24782

...

SUBjEcT:

Should GAO Continue Its Ban on the Use of Commercial

Travel Agents by Government Travelers? (8-103315)

For over a year now, NSIAD has been monitoring test

programs being run by the General Services Administration (CSA)

and the Department of Defense (DOD) to develop data on the

feasibility of using commercial travel agents f o r official

travel. A s you know, we have long prohibited federal agencies

and their employees from using travel agents in conjunction with

travel within or from the United States. The prohibition dates

back to 1899 when the Treasury, then responsible for transportation procurement documentation, directed agencies to place tneir

transportation demands directly with transportation companies.

The implication in those instructions was that agencies were not

to deal with any noncompany agent, such as a travel agent. Our

legal decisions, beginning in 1952, and regulations ( 4 C.F.R.

52.3) since 1 9 5 5 have continued that direction.

Many reasons have been cited in support of our prohibition.

Host have centered on the belief that having the government rely

on travel agents would create administrative problems, such as

maintaining fairness in distributing the business among the

thousands of potential firms wanting a share of government

business and ensuring the government was not overcharged. A l s o ,

there was doubt that travel agents could stay in business handling government accounts since the airlines had long taken the

position they would not pay commissions to agents on government

business and the government was not planning to pay any more for

tickets through agents than what it was already paying the airlines directly. There was a fear that if the airlines did pay

commissions, they would raise their fares to recover the cost of

commissions or stop offering government discounts.

Maintaining the prohibition has kept us in the middle of a

controversy--the travel agent industry and congressional small

business interests on one side and the airlines and their trade

association (the Air Transport Association of America {ATA)) on

, '. .

the other. Travel agents, obviously, want us to lift the

prohibition. The Subcommittee on Special Small Business Problems, House Committee on Small Business, specifically recommended in 1978 that we lift the prohibition. We reported at

that time, however, that we did not have enough evidence to warrant lifting it. We felt that no one had demonstrated that

travel agents would be more cost effective than existing procurement methods.

The airlines and their association have consistently urged

that we maintain the status quo. They have established their

own ticketing and travel offices on many government installations and in many federal buildings and have often pointed out

the value of their services. Obviously, they have saved money

by avoiding payment of commissions on government business, now

generally 1 0 percent of the price of a ticket.

In deference to the House Committee recommendation, we did

agree to allow further testing of the use of travel agents. The

Department of Labor conducted the first test in 1980, but it

proved little. Labor liked the service it received, but the

business--essentially without commissions--was not profitable to

the agent. Moreover, the test lacked a basis for comparison

with other types of service.

In 1981, we authorized GSA and DOD to test the travel agent

concept on a larger scale. GSA contracted with agents for

multiagency service in several of its regions. DOD had each

military department conduct its own test. In monitoring these

tests, we decided to look at the results in a somewhat different

light. We would no longer look just for cost savings, but

rather for reasons, if any, that would justify maintaining the

prohibition.

Both GSA and DOD tests got under way in 1982. GSA's test

was extensive, using the services of 32 different agents in 25

metropolitan areas throughout the United States. Some agents

serviced nearly 50 different agencies or departments within

agencies. DOD had tests in the Army, the Air Force, and Marine

Corps, each employing one agent at a single installation or

location. G S A ' s 2-year authorization for testing expires on

March 31, 1984; DOD's expires on September 30, 1984.

In our evaluation we looked first to see whether travel

agents were ready, willing, and able to provide the needed

services. Secondly, we wanted to see whether they could comply

with the government's travel regulations, including the Fly

America Act and other such constraints. Third, we wanted to see

whether the administrative problems thought inherent with using

travel agents were actually problems. Fourth, we wanted to see

whether there would be adequate audit trails in the travel agent

billing and payment systems. A l s o , we wanted to look at those

problems, such as commissions on government air fares, which we

had identified in a 1978 report,l to see whether they were

valid reasons for n6t lifting the prohibition.

To accomplish our goal, we observed the tests as they were

conducted and then discussed all facets of them with each party.

This included the GSA and DOD personnel who set up, ran, and

reviewed the tests; travelers and administrative personnel from

many of the client federal agencies; a sampling of the participating travel agents; and ATA and member officials. We analyzed

the GSA and DOD reports prepared for us on the tests.

The tests gave us the data we needed to decide the prohibition question. The data demonstrates that the use of travel

agents is feasible and that they offer a suitable option f o r

making official travel arrangements.

More specifically, agents have shown they are ready, willing, and able to provide the needed services. Several thousand

agents have asked to be kept apprised of the government's

needs. Hundreds of travel agents have offered fully acceptable

proposals in response to the GSA and DOD solicitations. Those

winning contracts run the spectrum from large companies to very

small businesses. Perhaps most importantly, federal agencies

and their employees have given the test travel agents nearly

unanimous approval for their services.

Agents have demonstrated they can comply with the government's travel regulations--including Fly America, the restrictions on first class travel, and the city pair/contract air fare

program. Most agents viewed the regulations as not significantly different from those of their other corporate clients.

Use of agents has not proven excessively burdensome from an

administrative point of view. Because the agents' services were

procured under the government's procurement regulations, G S A ' s

and DOD's administrative workloads have increased. But the

workloads of the client federal agencies have not. In many

cases the workloads have decreased. Use of agents has not

proven disruptive.

Finally, the audit trail is the same as it was before the

use of agents.

The commission issue has not proven to be a problem.Even

though agents are receiving commissions in connection with airline tickets covering official travel, there h a s been no noticeable change in the level or types-of airline fares available to

the government.

1A Look at the Prohibition on Using Commercial Travel Agents

(LCD-78-219, Aug. 8, 1978).

w h i l e t h e r e is no a s s u r a n c e t h a t t h i s s i t u a t i o n w i l l n o t

c h a n g e and i n f a c t t h e r e h a v e been t h r e a t s t h a t i t w i l l , t h e r e

is no b a s i s by w h i c h w e c a n presume t h a t i t w i l l .

A c c o r d i n g l y , w e c a n see no v a l i d r e a s o n why you s h o u l d n o t

l i f t t h e p r o h i b i t i o n permanently.

Such a n a c t i o n , a s w e unders t a n d i t , would g i v e a n y a g e n c y and government employee t h e

r i g h t t o use t r a v e l a g e n t s f o r o f f i c i a l b u s i n e s s where a d v a n t a g e o u s . Good t r a v e l management would s t i l l d i c t a t e some c o n t r o l s

over a g e n t u s e , s u c h a s l i m i t s on which a g e n t s c o u l d be u s e d .

W e h a v e a d v i s e d GSA and DOD i n f o r m a l l y t h a t l a n g u a g e t o t h a t

e f f e c t , p u b l i s h e d i n t h e o f f i c i a l t r a v e l o r p r o p e r t y management

r e g u l a t i o n s , would seem a p p r o p r i a t e , and t h e y h a v e a g r e e d t o

p r o p o s e it. GSA h a s a l s o asked t h a t t h e p r o h i b i t i o n , i f i t is

t o be l i f t e d , n o t be l i f t e d b e f o r e A p r i l 1 , 1 9 8 4 , t h e end of i t s

t e s t i n g p e r i o d and a r e a s o n a b l e time i n which t o p u b l i s h s u c h a

r e g u l a t i o n . W e a g r e e and s u g g e s t t h e l i f t i n g be e f f e c t i v e

A p r i l 1 , 1 9 8 4 . u n d e r t h e same premise, you may want t o w i t h h o l d

a u t h o r i t y t o l i f t t h e p r o h i b i t i o n as a p p l i e d t o d e f e n s e a g e n c i e s

u n t i l October 1 , 1 9 8 4 , when DOD's a u t h o r i t y t o r u n t h e t e s t s

ends.

The a t t a c h m e n t is a d e t a i l e d d i s c u s s i o n o f o u r s p e c i f i c

f i n d i n g s and c o n c l u s i o n s , i n c l u d i n g background o n t h e p r o h i b i t i o n , t h e role o f t r a v e l a g e n t s and a l t e r n a t i v e s t o t h e i r u s e ,

c o n g r e s s i o n a l i n t e r e s t i n t h e p r o h i b i t i o n and our o f f e r t o allow

t e s t i n g , t h e e a r l i e r Labor t e s t , and t h e GSA and DOD t e s t p l a n s

and how t h e t e s t s were a c t u a l l y r u n .

Our t e n t a t i v e f i n d i n g s and c o n c l u s i o n s were d i s c u s s e d

i n f o r m a l l y w i t h GSA and DOD o f f i c i a l s , w i t h p e r s o n n e l from

s e v e r a l f e d e r a l a g e n c i e s u s i n g t h e a g e n t s , w i t h ATA and a number

o f i t s l i n e members, and w i t h s e v e r a l t r a v e l a g e n t s and a g e n c y

a s s o c i a t i o n s t a f f . Some o f our v i e w s h a v e a l s o been p r i n t e d i n

t h e trade media.

Congressmen E l l i o t H. L e v i t a s of G e o r g i a and

Michael DeWine of Ohio h a v e w r i t t e n u s e x p r e s s i n g t h e i r c o n c e r n s

i n t h i s m a t t e r . W e h a v e a d v i s e d t h e i r o f f i c e s o f t h e s t a t u s of

our work and w i l l k e e p t h e m i n f o r m e d a s w a r r a n t e d .

Two p o i n t s d e s e r v e special m e n t i o n .

F i r s t , our findings

and c o n c l u s i o n s r e l a t e s o l e l y t o t h e f e a s i b i l i t y o f u s i n g t r a v e l

a g e n t s and n o t t o w h e t h e r t r a v e l a g e n t s are b e t t e r t h a n anyone

else making t r a v e l a r r a n g e m e n t s . W e make no judgment a s t o

w h e t h e r t h e government o u g h t t o u s e a g e n t s o v e r i n - h o u s e t r a v e l

o f f i c e s o r a i r l i n e o r a i r l i n e association t r a f f i c offices. W e

d e f e r s u c h judgment a t t h i s t i m e t o GSA and DOD and t h e a g e n c i e s

r e q u i r i n g t h e t r a v e l s e r v i c e s . S e c o n d l y , by recommending t h e

ban be l i f t e d , w e d o n o t i m p l y t h a t t h e t e s t p r o g r a m s were r u n

perfectly.

W e found p r o b l e m s .

E a r l y i n t h e program, o n e o f

G S A ' s a g e n t s d e f a u l t e d on o n e o f its c o n t r a c t s , r e s u l t i n g i n a

p e r i o d o f u n c e r t a i n t y . GSA, w e b e l i e v e , l e a r n e d s o m e t h i n g from

t h e e x p e r i e n c e , b u t some management p r o b l e m s s t i l l r e m a i n or

have p o t e n t i a l f o r r e s u r f a c i n g .

None of t h e s e p r o b l e m s a r e

s e r i o u s enough t o t h r e a t e n t h e program, b u t w e a r e b r i n g i n g them

to GSA's a t t e n t i o n i n a letter to t h e Administrator.

Attachment

ATTACHMENT I

SHOULD GAO CONTINUE ITS BAN

ON'USE OF COMMERCIAL TRAVEL AGENTS

TO MAKE OFFICIAL TRAVEL ARRANGEMENTS?

INTRODUCTION

GSA and DOD are testing the use of commercial travel agents

to make official travel arrangements. They are looking for ways

to obtain more flexibility in meeting their travel needs and to

improve the management of the government's travel programs.

Tests are being run in these 27 geographical areas.

GSA test locations

Philadelphia, Pa.

Pittsburgh, Pa.

Baltimore, Md.

Washington, D.C.,

area (six contracts )

Research-Triangle

Park, N.C.

Miami, Fla.

Cleveland, Ohio

Des Moines/Ames,

Iowa and Omaha,

L o s Angeles, Calif.

Kansas City, Mo.

Oklahoma City, Okla.

(five contracts)

Dallas/Fort Worth, Tex. San Francisco,

Houston, Tex.

Calif.

Denver, Colo. (two

Portland, Ore.

contracts)

Spokane, Wash.

Salt Lake City/Ogden,

Seattle, Wash.

Utah

Juneau, Alaska

Billings, Mont.

Boise, Idaho

Phoenix, Ariz.

San Diego, Calif.

Neb.

DOD test locations

U.S. Army Tank-Automotive Command, Warren, Mich.

Travis Air Force Base, Calif.

Marine Corps Development and Education Command, Quantico, Va.

GSA's test authority expires March 31, 1984; DOD's expires

September 30, 1 9 8 4 .

GAO is monitoring the tests to ensure that they are

providing data to support a lifting or continuing of the travel

agent prohibition, Both GSA and DOD have provided us their

interim evaluations of the first tests, all of which are still

running. They have indicated that use of travel agents,

although not perfect, appears to be feasible and offers a

satisfactory alternative to the government's present system for

making travel arrangements,

ATTACHMENT

WHAT WE LOOKED FOR AND HOW WE

EVALUATED THE TESTS

The GSA and DOD tests were approved under the guidelines

established by our August 20, 1979, circular letter, "Individual

Agencies May Request GAO To Lift I t s Prohibition on the Use of

Commercial Travel Agents for Government Travel. We intended

that these tests give us sufficient data to answer the following

questions:

1 . Are travel agents ready, willing, and able to provide

services to the government?

2. Can agents comply with government regulations?

3 . Does the use of agents place too great an administrative

burden on the government?

4 . Do agents' billing and payment procedures leave an

adequate audit trail?

In addition, we were looking f o r information to respond to

the problems cited in our 1978 report. (See note 1 on p . 3 of

the letter.) These problems were:

--The airlines had taken the position that they would not

pay commissions to travel agents that handled government

travel. Their theory was that travel agents existed to

promote new business and, thus, earned their commissions,

Government travel is not promotable--it is required to

meet government needs and travel agents get no commissions.

--The additional cost, if t h e airlines did pay the

commission on government travel, presumably would be

passed on to the government and to the public through

higher fares.

--Only major travel agents could afford to wait the several

months it takes to process payments to carriers for

government travel services.

--Selecting travel agents would be a problem. To be fair,

the government would have to allocate travel among all

qualified agents willing to-participate. This process

would cause the government added administrative expense.

--Agents' efforts to promote their services with government

agencies and personnel could be an administrative burden.

ATTACHMENT

--Travel personnel in the government do such administrative

work as issuing travel orders and controlling travel

costs. Tgese functions would continue even if agents

were used.

--Postpayment audit problems would be compounded by dealing

with thousands of agents that constantly come in and go

out of business. Instead of dealing with 23 domestic air

carriers, over 6,500 agents might be involved. Thus,

collecting overcharges would be extremely difficult and

the government's accounting and administrative burden

would be increased.

--Implementing section 5 of the International Air

Transportation Fair Competitive Practices Act of 1 9 7 4

(the so-called Fly America Act) would be extremely

difficult. Introducing thousands of travel agencies into

the complex justification and disallowance process

involved in screening the use of foreign-flag air carriers for government travel would further complicate the

already difficult task of administering the act.

The bulk of our work was done through discussions with

officials running the tests, beginning with preparation of the

solicitation through their performance evaluation; on-location

observations of the travel agents under contract; and

discussions with client federal agencies. At the GSA Office of

Transportation, we spent several months examining solicitation

paperwork, contract files, proposals, review sheets, and

operational activity reports. At the Army Military Traffic

Management Command (MTMC), we discussed, at length, matters

bearing on the solicitation and contracts.

As part of the agreement to allow the tests, GSA and DOD

gave us interim evaluation reports on the tests. GSA prepared a

report on the test locations involved in its initial

solicitation and submitted it to us in April 1 9 8 3 . DOD

submitted an evaluation of its Warren, Nichigan, test on June

1983.

Each report provided insight into the problems and

accomplishments resulting from the tests.

After completing most of the work at GSA and MTMC, we made

trips to Baltimore, Dallas, Kansas City, and Quantico and around

the Washington, D . C . , area, to ( 1 ) observe the tests, ( 2 ) meet

the contractors and discuss their-views about the tests, ( 3 )

meet with GSA and military officials administering or coordinating the tests to obtain their comments, and ( 4 ) meet personnel

from as many client agencies as possible to obtain their views

about the success of and problems related to the program. The

five agents contacted were:

. .

.. .

ATTACHMENT

--Four Seas and'seven Winds Travel, Inc., Baltimore, Md.

--Viking International, Inc., Dallas, Tex,

--Leisure Travel and Tours, Inc,, Kansas City, Mo.

--Omega World Travel, Washington, D.C.,

--International Business Travel, Ltd., Quantico, Va.

In addition, we visited the GSA travel management center run by

ATA at the Environmental Protection Agency to observe its

operations and compare it with the other offices run by travel

agents.

We briefly discussed the tests and our evaluation with the

following parties:

--the Office of Management and Budget;

--ATA (the primary trade group of the scheduled airlines in

America), including a number of its members;

--Associated Travel Nationwide {a trade group of travel

agents);

--staffs of Congressmen Elliot H. Levitas and Michael

DeWine; and

--reporters for the trade publications Travel Agent, Travel

Weekly, and Travel Management Daily.

All the discussions, interviews, comments and, observations

were considered in assessing the concept of using travel agents

and making a recommendation on the authorization of such a

program.

THE PROHIBITION AGAINST USING TRAVEL AGENTS

GSA is the civilian agency travel manager. DOD,

specifically the Commander of the Army's Military Traffic

Management Command, is the defense agency travel manager. Each

issues regulations governing travel management and monitors how

well the government manages its travel budget.

Typically these agencies have authority to institute new

programs without consulting GAO, The travel agent matter,

however, is different. GAO has long prohibited use of travel

agents in connection with most types of travel, most importantly, all travel originating in or within the United States.

. -' .

. . .'

, .

ATTACHMENT

The prohibition dates back to 1 8 9 9 , long before the travel

agent industry was a major force in selling transportation

services. In 1 8 9 9 , the Comptroller of the Treasury, then

responsible for prescribing the public forms used in procurement, approved a Justice Department request to use a transportation request form. He instructed other federal agencies to use

similar forms and directed that travelers issue them directly to

the company involved, Tha.t led to the practice of avoiding the

use of any noncompany agent.

No specific mention was made about nonuse of agents until a

their use. The first regulations

stating this premise were issued in 1955. They have been carried forward to the present day and are now published in part

5 2 . 3 , title 4 , of the Code of Federal Regulations.

1 9 5 2 GAO decision prohibited

Reasons generally cited for the prohibition include ( 1 )

administrative concerns, ( 2 ) the problem of commissions of

government t r a v e l , ( 3 ) concern over the financial capability of

a travel agent to handle a government account, and ( 4 ) lack of

more cost effective alternatives.

T h e administrative problems have centered on the impact of

the government having to deal with upward of 20,000 different

travel agents, particularly when compared with the present

system of dealing with only about 20 major airlines and a

hundred or so carriers overall. Concern has been voiced about

fairness in allocating business among so many agents and about

the ability of government agencies to control their promotional

tactics in government buildings. Furthermore, there were

concerns about auditing agent bills and questions as to whether

agents could understand and comply with government

administrative regulations.

Second is the issue of commissions on government travel.

The airlines have historically said they would not pay travel

agents commissions on government travel. Without the commissions, it was generally felt no agent would risk taking on a

government account. Because the government maintained it would

not pay more through an agent than what was charged by the

airlines, the only source of income would have to be commissions

on personal travel of government employees and that was not

considered to be sufficient for an agent to operate profitably.

ATTACHMENT

There was also doubt that many agents would possess the

financial capability to handle a government account. Government

agencies often took several months to pay their bills and

because agents had to pay their principals more quickly than

that, there was doubt that any but the largest agents could

afford that wait.

Finally, there was doubt that use of agents would produce

any savings for government agencies. Whether administrative

savings through fewer travel clerks would result seemed ques.

tionable since such personnel would have other administrative

duties to perform anyway. Also, if the airlines did pay commissions, government fares might have to be raised or fewer discount fares offered for government travelers.

All of these reasons weighed against the idea of the

government successfully using commercial travel agents. Federal

agencies had alternatives and there seemed little reason to

change.

TRAVEL AGENTS AND OTHER MEANS

FOR ARRANGING TRAVEL

Travel agents are one of several means available to the

public and businesses for making travel arrangements. They

provide an alternative to having to deal directly with transportation and travel companies or having some type of in-house

employee-run facility to make the arrangements.

Agents view themselves as professional travel advisers.

They are generally considered experts on travel destinations,

transportation alternatives, fares, accommodations, tours, and

most administrative details connected with travel. Most

visible, however, is their role in making reservations and

issuing tickets.

Travel agents also serve as an important outlet for sales

by the transportation and travel industry. They sell about

two-thirds of all airline tickets sold in the United States.

They obtain accreditation to sell airline tickets through the

Air Traffic Conference of America (ATC) and the International

Air Transportation Association. For their services they receive

commissions. In the case of the airlines, the comrnission is

usually about 1 0 percent of the ticket price. Commissions serve

as the basis for almost all the industry income.

.- . ,

. ATTACHMENT

ATTACHMENT

C u r r e n t l y t h e r e a r e a b o u t 22,000 a c c r e d i t e d a g e n t s .

Most

s e r v i c e s t h e y o f f e r c a n u s u a l l y be o b t a i n e d from a n o t h e r

s o u r c e , i . e . , d i r e c t l y from t h e a i r l i n e s o r o t h e r c a r r i e r s .

B e c a u s e GAO r e g u l a t i o n s have p r o h i b i t e d f e d e r a l a g e n c i e s from

u s i n g t r a v e l a g e n t s , t h e a g e n c i e s h a v e had t o secure t h e i r

t r a v e l n e e d s d i r e c t l y from t h e a i r l i n e s and o t h e r t r a n s p o r t a t i o n

companies. They have done t h i s i n s e v e r a l d i f f e r e n t ways.

Smaller a g e n c i e s h a v e g e n e r a l l y r e q u i r e d t h e i r e m p l o y e e s t o cont a c t t h e a i r l i n e s t h e m s e l v e s . L a r g e r a g e n c i e s h a v e o f t e n s e t up

in-house e m p l o y e e - s t a f f e d t r a v e l o f f ices t o h a n d l e a l l t h e cont a c t s w i t h t h e a i r l i n e s f o r t h e i r t r a v e l e r s . T r a v e l o f f i c e pers o n n e l c a n w r i t e t i c k e t s o r r e c e i v e them v i a t e l e t i c k e t i n g

m a c h i n e s o r have them p r i n t e d i n t h e i r o f f i c e s o n a i r l i n e

r e s e r v a t i o n system p r i n t e r s .

Some c i v i l i a n a g e n c i e s and many m i l i t a r y f a c i l i t i e s h a v e

used S c h e d u l e d A i r l i n e T r a f f i c O f f i c e s ( S A T O s ) o r C o n s o l i d a t e d

A i r l i n e T i c k e t O f f i c e s ( C A T O s ) . T h e s e are ATA o r a i r l i n e

s t a f f e d and r u n t r a v e l and t i c k e t i n g o f f i c e s p l a c e d i n g o v e r n ment b u i l d i n g s o r o n m i l i t a r y p o s t s a t t h e request o f a p a r t i c u l a r f e d e r a l a g e n c y . T h e r e a r e a b o u t 325 SAT0 s e r v i c e l o c a t i o n s ,

most o n m i l i t a r y p o s t s or i n f e d e r a l b u i l d i n g s . T h e r e i s a

h a n d f u l o f C A T O s , a l l i n t h e Washington, D . C . ,

area. SATOs and

CATOs h a v e e x i s t e d f o r o v e r 30 y e a r s .

CONGRESSIONAL CONCERN ABOUT THE

TRAVEL AGENT BAN

Over t h e y e a r s t h e r e h a s been much c o n g r e s s i o n a l . i n t e r e s t ,

p r o and c o n , i n t h e need f o r t h e C o m p t r o l l e r G e n e r a l t o ban u s e

o f t r a v e l a g e n t s . P e r h a p s t h e most i n t e r e s t w a s g e n e r a t e d i n

J a n u a r y 1976 when t h e Chairman of t h e Subcommittee o n S p e c i a l

S m a l l B u s i n e s s P r o b l e m s , House Committee on Small B u s i n e s s ,

wrote t h e C o m p t r o l l e r G e n e r a l a s k i n g f o r a s t u d y of t h e m a t t e r .

H i s r e q u e s t was prompted by t h e t r a v e l a g e n t i n d u s t r y a s k i n g h i s

subcommittee t o l o o k i n t o t h e C o m p t r o l l e r G e n e r a l ' s r e g u l a t i o n .

On August 8 , 1 9 7 8 , w e r e p o r t e d ( s e e n o t e 1 on p. 3 of t h e

memorandum) t h a t a l t h o u g h t h e r e were a r g u m e n t s o n b o t h s i d e s o f

t h e i s s u e , w e d i d n o t h a v e enough d a t a o n c o s t v e r s u s b e n e f i t t o

s u p p o r t a c h a n g e t o t h e ban. W e d i d i n d i c a t e w e would n o t

o b j e c t t o l i f t i n g t h e ban s e l e c t i v e l y , on a n agency-by-agency

b a s i s , i f i t were shown t h a t u s e o f a g e n t s was more e f f i c i e n t

and l e s s c o s t l y t h a n e x i s t i n g t r a v e l a r r a n g e m e n t p r o c e d u r e s .

The Subcommittee i n 1979 recommended w e l i f t t h e

p r o h i b i t i o n and a s k e d u s what a c t i o n w e p l a n n e d t o t a k e .

r e s p o n s e , t h e Comptroller G e n e r a l , o n August 2 0 , 1979, i s s u e d a

c i r c u l a r l e t t e r a d v i s i n g a g e n c i e s o f h i s w i l l i n g n e s s t o waive

t h e t r a v e l a g e n t r e g u l a t i o n s t o allow t r a v e l a g e n t t e s t s .

The

. *

. .

'1.

1 '

ATTACHMENT

b a s i c c r i t e r i o n f o r t h e t e s t w a s t h a t it b e d e s i g n e d t o p r o v i d e

u s d a t a t o s u p p o r t a p e r m a n e n t l i f t i n g of t h e ban.

THE FIRST TEST

The D e p a r t m e n t o f Labor (Employment and T r a i n i n g

A d m i n i s t r a t i o n ) , t h e D e p a r t m e n t of S t a t e , t h e N a t i o n a l C r e d i t

Union A d m i n i s t r a t i o n , G S A , and DOD s u b m i t t e d a c c e p t a b l e t e s t

p l a n s and were t h e f i r s t a g e n c i e s t o r e c e i v e p e r m i s s i o n t o r u n

t e s t s . Labor was t h e f i r s t t o g e t s t a r t e d when i t awarded a

c o n t r a c t t o a g e n t 0. Roy C h a l k I n t e r n a t i o n a l , L t d . , o n O c t o b e r

19, 1980. The c o n t r a c t was f o r 1 y e a r , b u t t h e e x p e r i m e n t

a c t u a l l y r a n f r o m March t o August 1981.

Labor r e p o r t e d a t t h e e n d of t h e t e s t t h a t i t had s i g n i f i c a n t l y r e d u c e d i t s o v e r h e a d and t r a v e l e x p e n s e s and had improved

q u a l i t y o f s e r v i c e u s i n g t h e t r a v e l a g e n t . However, t h e a g e n t

had n o t b e e n a b l e t o o b t a i n c o m m i s s i o n s from t h e a i r l i n e s on i t s

sales and a s i d e from t h e income from a l i t t l e n o n o f f i c i a l pers o n a l t r a v e l f o r which c o m m i s s i o n s c o u l d be p a i d , t h e e x p e r i m e n t

was f i n a n c i a l l y u n s u c c e s s f u l . Labor w a s c o n v i n c e d , however,

t h a t i f t h e commission p r o b l e m c o u l d b e overcome or o t h e r

s o u r c e s of income f o u n d , t h e c o n c e p t would b e f e a s i b l e . The

t e s t ended and was n o t r e s t a r t e d .

GAO s u b s e q u e n t l y r e v i e w e d t h e Labor e x p e r i m e n t b u t c o u l d

neither s u b s t a n t i a t e nor refute t h e agency's conclusions.

t h e m a t t e r of s a v i n g s , t h e r e was no p r e t e s t d a t a a g a i n s t w h i c h

t h e e x p e r i m e n t ' s r e s u l t s could be compared.

Moreover, w e f e l t

some of t h e b e n e f i t s p o i n t e d o u t by Labor c o u l d h a v e b e e n

a c h i e v e d w h e t h e r a t r a v e l a g e n t was used o r n o t .

THE MAJOR TESTS--GSA

AND DOD

GSA and DOD s u b m i t t e d t h e most a m b i t i o u s p l a n s t o t e s t t h e

t r a v e l agent concept.

On December 10, 1980, DOD requested a 1 - y e a r w a i v e r t o o u r

r e g u l a t i o n t o conduct a t e s t . W e approved it o n F e b r u a r y 1 0 ,

1981. DOD t h e n c a n v a s s e d a l l s e g m e n t s of t h e commercial t r a v e l

i n d u s t r y , i . e . , t r a v e l a g e n t s , mode o p e r a t o r s , commercial

v e n d o r s , c a r r i e r a s s o c i a t i o n s , and o t h e r t r a n s p o r t a t i o n - r e l a t e d

o r g a n i z a t i o n s , t o provide ( 1 ) a s i n g l e p o i n t of c o n t a c t f o r a i r ,

r a i l , b u s , l o d g i n g , and r e n t a l c a r s e r v i c e s , ( 2 ) r e a d y t e l e p h o n e

access, ( 3 ) t i c k e t and i t i n e r a r y d e l i v e r y , ( 4 ) d e t a i l e d

management r e p o r t s , and ( 5 ) i n c r e a s e d u s e of t r a n s p o r t a t i o n ,

l o d g i n g , and r e n t a l c a r d i s c o u n t s .

. .. I.

ATTACHMENT

DOD based its selection process on unrestricted competition

and asked offerors to submit both technical and managerial proposals. DOD planhed to reimburse the contractors only for

actual transportation costs. DOD pointed out that the travel

agents were expected either to be recompensed on a commission

basis by carriers or others with whom they booked the travel in

accordance with the custom of the trade. Consequently, cost was

not to be a factor in evaluating proposals. The winner was to

be selected on the basis of its offering DOD the most comprehensive and advantageous service possible.

GSA requested an exemption to test t h e use of travel agents -

on April 30, 1981. It advised that it wanted t o establish one

or more commercial travel agent-contracted operations in each of

i t s 11 regions over a 2-year period. Its plan was to establish

pilot projects in two or three regions where it felt that travel

agent offices could feasibly operate as travel centers servicing

a group of agencies in a federal center environment and then

expand the program into other regions when conditions warranted. GSA viewed these centers as a means to replace smaller

single-agency travel offices and existing SATOs. Its objectives, contractor selection process, factors used to evaluate

the proposals, and plan to compensate the agents were all

similar to those in DOD's test plan.

The contract solicitation process

The acquisition of travel agent and travel management

service was conducted under terms of the civilian agency and

defense procurement regulations. GSA issued nine separate

solicitations--the earliest on September 15, 1981, and the

latest on January 3 , 1 9 8 3 . DOD issued three separate solicitations, all from April to August 1 9 8 2 . Procurements were

252(c)(10) and 10 U.S.C.

negotiated pursuant to 41 U.S.C.

2304(a)(10).

The GSA solicitation process consisted of several phases.

First, GSA identified those regions where there appeared to be

sufficient federal travel to warrant contracts. Then it asked

its regional staff to quantify the demand in those regions.

Next it notified interested travel agents of the impending tests

and issued a request for proposals (RFP). Interested parties

were given 30 days to respond to the RFP. GSA spent the next 30

days evaluating the proposals and visiting the highest evaluated

respondents. Then it awarded contracts for particular sites and

gave the contractors 45 days to begin operations. Regional

staff were assigned responsibility to monitor the contracts and

coordinate the agents' activities with the client federal

agencies.

ATTACHMENT

The first locations selected for the GSA test were

Washington, D.C.;'Philadelphia; Denver; Dallas; Seattle; and

Raleigh-Durham, North Carolina. GSA held prebidders conferences

for the Washington, Philadelphia, and Seattle solicitations.

From these conferences GSA established a mailing list of

interested agents to supplement the required advertising in

Commerce Business Daily.

The first solicitation was issued September 1 5 , 1 9 8 1 , for

multiple (six) sites in Washington, D.C. and single sites in

Philadelphia, Denver, Dallas, Seattle, and Raleigh-Durham. In

it, GSA advised that the prospective agents were expected to

provide or arrange for

--transportation reservations and ticketing for air, rail,

bus and steamship carriers;

--reservations for hotel/motel accommodations;

--automobile rental services;

--seminars, meetings and workshops at sites selected by the

government (including conference rooms, lodging, meals,

ground transportation, audiovisual equipment, and related

services);

--international travel, including assistance in obtaining

passports, visas, and advice regarding health

requirements;

--preparation of travelers' itineraries;

--generation of detailed management reports;

--issuance of travelers checks and travel insurance

policies; and

--personal travel for government employees (optional).

Management reports were deemed to be an important part of

the test. GSA asked the agents to develop the following

reports:

--A monthly narrative of the .contractors' activities with

problems, solutions, an assessment of the overall

operation of the program and suggestions for enhanced

services.

--Billings for each participating government agency, with

the frequency of billings and the exact format to be

established during the negotiation process. The reports

were to include an itemized listing of:

I .

ATTACHMENT

--A

The.'full name of each traveler., the class of

service, the carrier, the origin and destination

points, and the government transportation

request (GTR) number assigned to the trip.

Transportation charges by mode of travel for

each trip, an indication of whether G S A ' s

discount programs (AMTRAK, airline contract)

were used, the full coach fare for the trip, and

the difference between the full coach fare and

the actual transportation charge.

Total transportation charges for the agency, for'

the billing period, and for the year to date.

quarterly summary of billing data indicating:

Total number of official travelers using the

contractors' services, by agency.

Percentage of official travelers, by agency,

using the airline contract program or Amtrak

discount

--A

Estimated cost savings (calculated by the

difference between the regular coach fare and

the discount fare), achieved by the program.

The number of working days between contractor

billings and receipt of payment, by agency.

The number and percentage of tickets refunded or

reservations canceled, by agency.

quarterly report on the use and cost of car rentals

including the name of the using government agency, the

traveler, the car rental organization, the city location,

the number of rental days, the car type (subcompact,

compact, intermediate, or large size), and the rental

discount obtained.

GSA also asked that the agents locate in governmentselected sites. It said it would give them adequate office

space for their operations at no cost, but any renovation to the

space, such as erection or removal of walls and partitions,

electrical or plumbing connections, painting, carpeting, and any

related work, would be at the contractors' expense.'

In subsequent solicitations, G S A advised that it preferred

that the agent not locate in government space.

. I

ATTACHMENT

GSA also advised it would give the agents copies of the

Federal Travel Regulations (FTR), all necessary information

relative to the GSA contract airline program, the GSA

hotel/motel directory, and government telephone directories.

The agents, however, were expected to provide all necessary

office equipment, furniture, supplies, tariffs, automated

reservation and ticketing equipment, data systems, telephone and

teletype services, and related items necessary to conduct their

operations and to fulfill the contract requirements.

GSA encountered a problem on whether any of the proposed

awards should be "small business set asides." The Small

Business Administration (SBA) wanted all the awards set aside

for small businesses. GSA did not want any small business set

asides. Compounding the problem was the question of what

constituted a small business in t h e travel agent industry. SBA

initially wanted to have GSA classify travel agents as service

industry enterprises, and in that grouping, a small business was

any enterprise with annual revenues not exceeding $2 million.

Whether the revenues were the net or gross figures was not

clear.

Eventually SBA agreed to classify travel agents as part of

the transportation industry, and the definition for a small

business in that grouping was 500 or fewer employees. Of the 4 3

sites where services were asked for, 2 3 were set aside by GSA

for small business.

G S A ' s solicitation asked prospective bidders to address two

broad sets of factors: ( 1 ) technical management and ( 2 ) business management. Within each set were a number of specific

elements.

In the technical management area, GSA asked that the

prospective agents demonstrate their understanding of what GSA

was looking for. A l s o , GSA asked the agents to demonstrate how

they would provide authentication that any transportation billed

to the United States was for official travel and to certify that

they would comply with government travel regulations, such as

those governing use of contract air carriers, the Fly America

program, and restrictions on first class travel.

Second, the contractors were required to provide full-time

onsite project managers responsible for the administration,

supervision, and coordination of their operations. They were

required to show how the projects were to be managed and carried

out, including how staff needs were to be established, how the

workload was to be organized, and how quality control was to be

instituted. Also, the agents were to provide an implementation

ATTACHMENT

plan and explain the type of automated equipment and

reservation/ticketing system to be used. They also were to

explain how each client federal agency's billing and reporting

requirements were to be met.

Third, GSA required that the agents' personnel be experienced in arranging transportation via all modes and be familiar

with lodging establishments and vehicle rental firms. Personnel

also had to be experienced in operating state-of-the-art automated reservation and ticketing equipment. The site manager had

to have at least 3 years' experience, and key personnel had to

have at least 1 year of experience in delivering volume travel

services. 'Volume travel services" were defined as corporate or

governmental accounts with annual billings exceeding $100,000.

In the business management area, the prospective contractors had to show their capability to perform the requirements

specified. This included a narrative describing the agents'

organization, demonstration of financial capability to carry the

government's accounts; proof of accreditation or authorization

to act as agents for air, rail, bus, and steamship carriers; and

information on previous experience in providing volume travel

services.

Proposal review and contract award

The interested agents had 30 days to submit their proposals

to GSA. At that point, all bids were given a cursory review by

the contracting officer to ensure that all bids had addressed

the technical and business management criteria. Then they were

given to a technical review panel for evaluation and scoring.

The panel consisted of at least two, but generally five, personnel, either all GSA personnel or a mix of GSA, prospective

client federal agency, and Federal Executive Board personnel.

The solicitation spelled out the.evaluation criteria,

including each factor under review, its weight in the overall

evaluation, the basis for analysis, and the critical elements

related to each factor. In subsequent solicitations, the review

factors were slightly revised.

After each member of the panel had scored the proposals

covering a location, the average scores were established. The

competitive range consisted of all. scores above the average or

median score.

In most cases, at least one member of the panel visited

those agents in the competitive range to corroborate the information in the proposals. After the visits, the agents were

given an opportunity to submit "best and final" offers. After

ATTACHMENT

these were reviewed, the contracting officer selected the agents

for contracts and'made the awards. Generally, the agents were

given 4 5 days to begin operation on the government accounts.

The contracts generally were to run for 1 year; the government

had the option to extend them for an additional year. All

contracts were to expire at the end of the testing period, March

31,

1984.

Contract imdementation and

quality control

Once GSA headquarters officials had awarded the contracts,

the day-to-day administration of the contracts was turned over

to the GSA regional staff. Technically, the regional staff were

not contract administrators but rather project coordinators.

They took care of the day-to-day problems and'referred the more

difficult problems to headquarters.

Regional staff were also responsible for monitoring the

negotiation of agreements between the travel agents and their

client federal agencies on matters such as the frequency of

issuing government transportation requests, billing and paying

cycles, ticket delivery schedules, and time frames for preparing

management reports. Regional staff were also responsible f o r

monitoring the contracts and identifying areas when the contractors were not meeting the contract terms.

Similarities and differences between

the GSA and DOD tests

The DOD test was much the same as the GSA test, although it

was somewhat smaller in scale and was managed somewhat differently. Its basic objective was testing an alternative travel

procurement concept through competitive bidding by any and all

segments of the commercial travel industry. DOD was hoping the

concept would give DOD travelers a single point of contact for

comprehensive travel services, all at no cost to the government.

The Army's Military Traffic Management Command, as DOD's

travel manager, initiated the test on behalf of all DOD. It

asked the services to identify potential test sites and then

completed a draft RFP and contract for local installation

contracting officers' review and implementation.

while GSA had requested service at 4 5 locations, DOD asked

for service at only 3 . The sites selected were the Army's

Tank-Automotive Command, Warren, Michigan; the Marine Corps'

Development and Education Command, Quantico, Virginia; and

Travis Air Force Base, California.

ATTACHMENT

The first solicitation was issued April 15, 1 9 8 2 , for the

Warren, Michigan, site. Contract award was made to Davis

Agency, Inc. (later known as Warren Davis Agency, Inc.), on

August 2, 1982, and the test began October 1 , 1982. The

Quantico and Travis Air Force Base tests began in early 1983.

DOD had not planned to set aside any contracts for small

business but eventually agreed to requests from SBA to set aside

at least one. This was the Travis Air Force Base site. DOD, as

had GSA in its first solicitation, stipulated the prospective

contractors had to locate on the military posts or federal

properties if they received contracts.

Two differences between the DOD and GSA contracts were that

DOD's spelled out the billing time frames and required that

local installation officials have acess to the agents' reservation systems. In the GSA contracts, there were no statements

about minimum and maximum billing time frames. This was to be

negotiated between the agents and clients after contracts had

been awarded. On the other hand, DOD's contracts stated that

the billing period could not be less than 1 week or longer than

2 weeks. Also DOD, but not GSA, required the agents to give

each installation an airline reservation system terminal which

allowed local officials to monitor the agents' work.

FINDINGS AND CONCLUSIONS

The GSA and DOD tests have shown:

--The travel agent industry is very interested in serving

the government.

--Travel agents can provide services as required and

overcome previously cited problems, such as the commission and slow payment problems. Procuring, adminstrative, and using federal agencies are over-whelmingly

satisfied with services received.

--Travel agents can and will comply with the government's

administrative regulations, such as Fly America.

--Federal agencies can overcome all administrative problems

in procuring and using travel agent services.

--Adequate audit trails are established to facilitate audit

of travel agent billing and payment systems.

--Payment of commissions on government travel did not

result in any identifiable changes in fare levels or

discount fare availability to government agencies.

. I ..

. .

' L

ATTACHMENT

A c c o r d i n g l y , w e f i n d no v a l i d r e a s o n why t h e p r o h i b i t i o n

a g a i n s t u s e o f t r a v e l a g e n t s s h o u l d n o t be l i f t e d p e r m a n e n t l y .

D e t a i l s of o u r f i n d i n g s and c o n c l u s i o n s follow.

T r a v e l a g e n t s were i n t e r e s t e d i n

D r o v i d i n a s e r v i c e s and made

r e s p o n s i v e b i d s d e s p i t e major c o n c e r n s

F o r many y e a r s , w e h a v e r e c e i v e d many l e t t e r s and o t h e r

e x p r e s s i o n s o f i n t e r e s t i n government b u s i n e s s from t r a v e l

a g e n t s . Most a g e n t s wrote u s d i r e c t l y . O t h e r s wrote t h e i r

congressmen o r small b u s i n e s s i n t e r e s t s i n t h e C o n g r e s s t h a t

forwarded t h e i r c o n c e r n s t o u s .

When GSA announced i t s p l a n t o t e s t t h e u s e o f t r a v e l

a g e n t s , it received n e a r l y a thousand letters expressing

i n t e r e s t . I n 1982, G S A r e p o r t e d i t had r e c e i v e d a n o t h e r 1,000

l e t t e r s e x p r e s s i n g i n t e r e s t . S i n c e t h e n i t h a s r e c e i v e d 1,800

more. L i k e w i s e , t h e r e is much i n t e r e s t i n DOD's program.

The i n d u s t r y ' s r e s p o n s e h a s been more t h a n j u s t i n t e r e s t .

Many a g e n t s , where RFPs were i s s u e d , s u b m i t t e d f u l l y r e s p o n s i v e

p r o p o s a l s e v e n though t h e r e were f a c t o r s w h i c h t e n d e d t o c u r t a i l

t h e response.

A f t e r i s s u i n g its i n i t i a l s o l i c i t a t i o n on September 15,

1981, c o v e r i n g requests f o r s e r v i c e i n W a s h i n g t o n , D.C.; D a l l a s ;

Denver; and R e s e a r c h - T r i a n g l e P a r k , G S A r e c e i v e d 2 3 r e s p o n s i v e

proposals.

A f t e r i s s u i n g i t s l a s t major s o l i c i t a t i o n ,

J a n u a r y 3 , 1983, c o v e r i n g 17 s i t e s , GSA r e c e i v e d from 6 t o 25

p r o p o s a l s f o r e a c h s i t e . DOD, f o r i t s t h r e e s o l i c i t a t i o n s ,

r e c e i v e d from s i x t o e i g h t p r o p o s a l s f o r e a c h s i t e .

S e v e r a l f a c t o r s , however, c u r t a i l e d a l a r g e r e s p o n s e t o t h e

tests, a t l e a s t t h e e a r l i e r ones. I n i t i a l l y , t h e Small Business

A d m i n s t r a t i c n ' s d e f i n i t i o n o f a small b u s i n e s s p r e v e n t e d GSA

from s o l i c i t i n g t h e h i g h d o l l a r volume t r a v e l a g e n t s . Many o f

t h e s e a g e n t s , however, d i d e x p r e s s i n t e r e s t i n t h e program.

E v e n t u a l l y SBA changed i t s d e f i n i t i o n o f a small b u s i n e s s i n t h e

t r a v e l a g e n t i n d u s t r y , and t h i s allowed many p r e v i o u s l y

restricted a g e n t s t o respond.

An e v e n more s i g n i f i c a n t f a c t o r l i m i t i n g i n t e r e s t i n t h e

t e s t s was t h e a g e n t s ' c o n c e r n s o v e r commissions on a i r l i n e

tickets.

T h e a i r l i n e s had a l w a y s r e f u s e d t o p a y commissions

o n government t r a v e l , a r g u i n g t h a t commissions were r e s e r v e d f o r

p r o m o t i o n a b l e - t y p e t r a v e l , which d i d n o t i n c l u d e government

t r a v e l . When GSA began t o a d v e r t i s e i t s t e s t program, t h e

a i r l i n e s r e s t a t e d t h e i r p o l i c y . Some o f f i c i a l s i n DOD f e l t t h e

a i r l i n e s were u s i n g "scare t a c t i c s . "

. ATTACHMENT

ATTACHMENT

Other a g e n t s appeared r e l u c t a n t about p a r t i c i p a t i n g because

o f t h e o f t - s t a t e d p r o b l e m of t h e g o v e r n m e n t ' s payment s y s t e m .

Many times t h e a i r l i n e s had t o w a i t 6 0 t o 9 0 d a y s t o g e t p a i d .

The a i r l i n e s had l o n g c o m p l a i n e d o f these p r o b l e m s , and what

w i t h most a g e n t s h a v i n g e v e n lesser f i n a n c i a l c a p a b i l i t y , t h e

c o n c e r n of t h e t r a v e l a g e n t i n d u s t r y was r e a l .

F i n a l l y , a g e n t s were c o n c e r n e d a b o u t h a v i n g t o l o c a t e o n

government p r o p e r t y .

Both GSA, i n i t s e a r l y s o l i c i t a t i o n s , and

DOD, t h r o u g h o u t , a s k e d p r o s p e c t i v e a g e n t s t o l o c a t e i n g o v e r n ment s p a c e and i n some cases t o s e r v e a l l o f s e v e r a l l o c a t i o n s

w i t h i n a m e t r o p o l i t a n area. T h i s e n t a i l e d s i g n i f i c a n t f i n a n c i a l

r i s k s of g e t t i n g s t a r t e d i n new l o c a t i o n s i n a t i m e l y manner.

A l s o , i t r a i s e d f u r t h e r c o n c e r n s a s t o w h e t h e r t h e new o f f i c e s

could be considered f u l l s e r v i c e o f f i c e s s e r v i n g t h e p u b l i c ,

t h e r e b y q u a l i f y i n g for f u l l a i r l i n e commissions, g e n e r a l l y 10

percent versus 3 percent f o r in-plant offices.

Major c o n c e r n s were overcome and

a u e n c i e s h a v e been s a t i s f i e d w i t h

services r e c e i v e d

F o r t h e most p a r t , GSA, DOD, and each of t h e n e a r l y 100

c l i e n t a g e n c i e s were s a t i s f i e d w i t h s e r v i c e s of t h e t r a v e l a g e n t

i n d u s t r y . Major c o n c e r n s were overcome, a l t h o u g h t h e r e were

serious s t a r t u p p r o b l e m s .

GSA and DOD r e q u i r e d t h e a g e n t s t o p r o v i d e a wide r a n g e o f

s e r v i c e s , i n c l u d i n g making t r a n s p o r t a t i o n r e s e r v a t i o n s , procuri n g and d e l i v e r i n g t i c k e t s , making r e s e r v a t i o n s f o r accommodat i o n s and c a r r e n t a l s , p r e p a r i n g i t i n e r a r i e s , p r e p a r i n g management r e p o r t s , f u r n i s h i n g t r a v e l e r s c h e c k s I and g e n e r a l l y p r o v i d i n g a s s i s t a n c e i n a l l m atter s related t o t r a v e l and c o n f e r e n c e s .

The two m o s t i m p o r t a n t c o n s i d e r a t i o n s i n t h e t e s t s were

a g e n t s ' a b i l i t y t o p r o c u r e and d e l i v e r i n a t i m e l y manner t h e

lowest p r i c e d a i r l i n e t i c k e t s m e e t i n g t r a v e l e r s ' n e e d s and

c o n f o r m i n g t o t h e g o v e r n m e n t ' s r e g u l a t i o n s and t o p r o v i d e

s p e c i f i e d management r e p o r t s . Key t o m e e t i n g t h e s e needs were

--finding

a source o f income t o o p e r a t e p r o f i t a b l y ,

- - m a i n t a i n i n g f i n a n c i a l s o l v e n c y b e c a u s e o f payment

p r o b l e m s I and

--matching

resources w i t h r e q u i r e m e n t s .

T h e r e was no q u e s t i o n more i m p o r t a n t t o t h e a b i l i t y of

t r a v e l a g e n t s t o p r o v i d e s e r v i c e t h a n f i n d i n g a s o u r c e of income

t o o p e r a t e p r o f i t a b l y . S i n c e t h e government had n e v e r p l a n n e d

t o pay t h e a g e n t s a n y t h i n g f o r t h e i r s e r v i c e s , t h e y had t o l o o k

t o t h e a i r l i n e s . Y e t t h e a i r l i n e s had h i s t o r i c a l l y s t a t e d t h e i r

r e f u s a l t o pay commissions.

...

ATTACHMENT

The i n d u s t r y a t t a c k e d t h e p r o b l e m d i r e c t l y .

The f e d e r a l

a g e n c i e s i s s u e d t h e i r t r a n s p o r t a t i o n requests t o t h e a g e n t s i n

t h e a g e n t s ' names. When t h e a g e n t s i s s u e d t i c k e t s , t h e y s i m p l y

d e d u c t e d t h e i r commissions from t h e amounts o t h e r w i s e owed t h e

a i r l i n e s and paid them w h a t was l e f t .

They t h e n b i l l e d t h e

government and c o l l e c t e d t h e f u l l amounts. Some a i r l i n e s

t h r e a t e n e d t o t a k e back t h e amounts w i t h h e l d , b u t t h e y d i d n o t .

Once t h e p r e c e d e n t was s e t , i t became much e a s i e r f o r t h e t r a v e l

industry to operate profitably.

The q u e s t i o n of f i n a n c i a l s o l v e n c y was r e l a t e d t o w h e t h e r

any b u t t h e l a r g e s t a g e n c i e s c o u l d c a r r y t h e government

a c c o u n t s . Most a g e n t s had to d e a l w i t h many d i f f e r e n t a g e n c i e s

and d i f f e r e n t terms of payment; i . e . , when a b i l l c o u l d be pres e n t e d for payment and what c o n s t i t u t e d a r e a s o n a b l e p e r i o d i n

which t o expect payment.

GSA had n o t s t a t e d these terms i n i t s

c o n t r a c t s . I t had l e f t t h i s t o t h e a g e n t s and c l i e n t a g e n c i e s

to negotiate.

Some a g e n c i e s were a t l e a s t 60 d a y s b e h i n d i n t h e i r paym e n t s t o a g e n t s . O t h e r s were l e t t i n g a g e n t s i n v o i c e them o n l y

e v e r y 30 d a y s . However, o n c e t h e s e p r o b l e m s were d i s c u s s e d w i t h

a l l p a r t i e s , t h e y were g e n e r a l l y r e s o l v e d .

Most a g e n c i e s

a p p e a r e d t o be p a y i n g t h e i r b i l l between 1 4 and 30 d a y s a f t e r

r e c e i p t of proper i n v o i c e s .

P a s s a g e o f t h e Prompt Payment A c t ( P u b l i c Law 97-177) on

May 21, 1982, and i s s u a n c e of t h e O f f i c e o f Management and Budg e t ' s i m p l e m e n t i n g i n s t r u c t i o n s ( C i r c u l a r N o . A-125), d a t e d

August 1 9 , 1 9 8 2 , h e l p e d r e s o l v e t h i s i s s u e . T h e s e d i r e c t e d

f e d e r a l a g e n c i e s to pay t h e i r b i l l s w i t h i n 3 0 d a y s o f r e c e i p t of

p r o p e r i n v o i c e s o r be s u b j e c t e d t o i n t e r e s t e x p e n s e s . N e i t h e r

t h e law n o r t h e c i r c u l a r ended t h e p r o b l e m o f s l o w p a y , b u t t h e y

a t l e a s t e s t a b l i s h e d some b a s i c s t a n d a r d s of c o m p l i a n c e . Most

a g e n t s , l a r g e and s m a l l , i n d i c a t e d t h e y c o u l d l i v e w i t h them.

To p r e v e n t any undue f i n a n c i a l h a r d s h i p s r e l a t e d t o c a r r y i n g too many government c o n t r a c t s , GSA a l s o r e v i s e d i t s t h i n k i n g

a b o u t g i v i n g any o n e a g e n t more t h a n o n e c o n t r a c t o r r e q u i r i n g

o n e a g e n t t o s e r v e m u l t i p l e l o c a t i o n s i n o n e area. O r i g i n a l l y

GSA had awarded c o n t r a c t s t o s i n g l e a g e n t s a t a number of d i f f e r e n t l o c a t i o n s i n o n e m e t r o p o l i t a n a r e a or a t w i d e l y d i s p e r s e d

areas a c r o s s t h e country.

F o r example, e a r l y i n t h e program,

o n e a g e n t was awarded a c o n t r a c t s e r v i n g s e v e r a l l o c a t i o n s i n

and a n o t h e r s i t e i n Denver. The c o n t r a c t o r

W a s h i n g t o n , D.C.,

s u b s e q u e n t l y d e f a u l t e d , and GSA had t o r e a c t q u i c k l y t o f i l l i n

w i t h new a g e n t s and m a i n t a i n t h e program.

T o a v o i d any f u t u r e

problems associated w i t h one contractor d e f a u l t i n g on s e v e r a l

d i f f e r e n t c o n t r a c t s or o n e a g e n t s p r e a d i n g i t s f i n a n c i a l

c a p a b i l i t y too t h i n , G S A s t o p p e d a s k i n g t h a t o n e a g e n t s e r v e a l l

s i t e s i n a n a r e a and g a v e p r e f e r e n c e , a l l o t h e r t h i n g s b e i n g

e q u a l , t o a g e n t s i n new a r e a s t h a t had no o t h e r c o n t r a c t s .

ATTACHMENT

Another problem was matching resources--personnel and

automatic data processing equipment--with the government's

requirements. Initially, some agents experienced problems in

staffing. They either had too little or too much staff. Most

of this was not the agents' fault but rather the government's

inability to accurately forecast the volume of business it

expected the agents to handle. In the GSA tests, GSA canvassed

the civilian agencies to find out which would participate in

this test program and to what extent. Once the contracts were

let, often agencies did not immediately join in as they had said

they would or the estimates proved significantly inaccurate.

Most agents eventually adjusted their staffing levels to the

requirements, but there were some delays and problems in

service.

All agents that were awarded contracts owned o r leased one

of the major state-of-the-art reservation systems, but not all

had good automated systems to produce the management reports the

contracts called for. Some problems persisted for long periods,

although most were eventually solved to the contracting officials' satisfaction.

One measure of agents' success in the test was their

ability to understand and comply with the Federal Travel Regulations (FTR) which established the basis by which all transportation and travel was procured and performed in the government.

Some existing federal travel programs were administered and

regulated through the FTR; others relied upon voluntary agency

compliance. In the "Statement of Work" and "Specific Tasks"

sections of the GSA and DOD contracts, compliance with these

regulations was mandated. Failure to comply could result in

default of the contracts.

The largest of the federal travel programs in operation,

which was regulated by the FTR, was GSA's contract airline

city-pair program. GSA contracted with the airlines for

specifically discounted fares on routes heavily traveled by the

government travelers. The FTR stated agencies must use these

fares when they were available, unless there existed one of five

exceptions. The next most prominent policy involved the Fly

America Act. In brief, all government travelers were required

to use U . S . certificated air carriers when performing official

business overseas. Failure to use these carriers, unless an

exception was authorized, could carry a s t i f f financial penalty

for the traveler. This t o o was required by the FTR.

ATTACHMENT

Two p r o g r a m s n o t ' r e g u l a t e d by t h e FTR were G S A ' s

H o t e l / M o t e l D i s c o u n t Program and i t s C o n t r a c t R e n t a l V e h i c l e

Program. Both r e l i e d upon v o l u n t a r y a g e n c y c o m p l i a n c e t o e n s u r e

t h e p r o g r a m s were used. GSA c o n t r a c t e d w i t h l o d g i n g e s t a b l i s h m e n t s and car r e n t a l f i r m s t o o b t a i n d i s c o u n t e d r a t e s f o r

government t r a v e l e r s .

T h e s e programs a r e r e l a t i v e l y new and a r e

g r a d u a l l y becoming more s u c c e s s f u l as GSA i s a b l e t o n e g o t i a t e

b e t t e r terms. T h e s e p r o g r a m s and t h e F l y America p o l i c y a r e

p u b l i c i z e d by t h e t r a v e l a g e n t s , a n d , where r e g u l a t e d , m u s t be

enforced.

According to G S A ' s f i l e s on t h e i n d i v i d u a l s o l i c i t a t i o n s t o

e s t a b l i s h t r a v e l c e n t e r s and t h e i r i n t e r i m e v a l u a t i o n r e p o r t s ,

t h e a g e n t s g e n e r a l l y u n d e r s t o o d t h e r e q u i r e m e n t s and c a r r i e d

them o u t . The a g e n t s m e t w i t h t h e i r c l i e n t a g e n c i e s and were

t a u g h t how t o implement t h e i r t r a v e l p o l i c i e s and r e g u l a t i o n s .

I n most cases, t h e employee t r a v e l a u t h o r i z a t i o n f o r m s a l s o

conveyed t h i s i n f o r m a t i o n . T h e s e i n s t r u c t i o n s u s u a l l y c o v e r e d

a u t h o r i z e d mode o f t r a n s p o r t a t i o n ( a i r , r a i l , b u s , e t c . ) , c l a s s

o f c a r r i e r p e r m i t t e d f o r u s e , and a u t h o r i z a t i o n t o u s e a r e n t a l

car.

O u r i n t e r v i e w s w i t h c l i e n t a g e n c i e s and review of management r e p o r t s , and G S A ' s i n t e r i m e v a l u a t i o n r e p o r t showed t h a t

t r a v e l a g e n t s were g e n e r a l l y complying w i t h t h e r e g u l a t i o n s .

They m e t t h e s e r e q u i r e m e n t s by booking c o n t r a c t a i r f a r e s when

a v a i l a b l e o r t h e most e c o n o m i c a l f a r e s a v a i l a b l e t o meet t h e

t r a v e l e r s ' n e e d s when a c o n t r a c t f l i g h t was u n a t t a i n a b l e and by

o b t a i n i n g government d i s c o u n t e d r a t e s f o r l o d g i n g s and car

rentals.

Some a g e n t s e v e n o f f e r e d t o a b s o r b t h e d i f f e r e n c e i n

f a r e s i f t h e y f a i l e d t o book t h e lowest a v a i l a b l e . Much of t h e

a g e n t s ' success a p p e a r e d t o be a t t r i b u t a b l e t o t h e i r u s e o f

up-to-date s t a t e - o f - t h e - a r t r e s e r v a t i o n s y s t e m s , c r e a t i o n and

use o f t h e i r own programs f o r r e s e a r c h i n g f a r e s , and s t a y i n g i n

c o n t a c t d a i l y w i t h a l l t h e major c a r r i e r s f o r f a r e c h a n g e s ,

C l i e n t a g e n c i e s a l s o r e p o r t e d no p r o b l e m s w i t h t r a v e l e r s m e e t i n g

t h e F l y America A c t r e q u i r e m e n t s when booking f l i g h t s t h r o u g h

the agents.

Two o t h e r a r e a s o f c o n c e r n f o r G S A and t h e c l i e n t a g e n c i e s

d e a l t w i t h t h e u s e o f t h e government t r a n s p o r t a t i o n request f o r

p r o c u r i n g p a s s e n g e r s e r v i c e s and t h e h a n d l i n g o f t i c k e t r e f u n d s .

GSA e n c o u r a g e d a g e n c i e s t o u s e a " b l a n k e t " GTR--a s i n g l e GTR

c o v e r i n g p r o c u r e m e n t o f a l l o f a n a g e n c y ' s t i c k e t s f o r a week, 2

weeks, o r e v e n a month. Most a g e n c i e s u s e d b l a n k e t GTRs d u r i n g

t h e t e s t s ; many, f o r t h e f i r s t time.

U s e o f t h e b l a n k e t GTR

p r o v i d e d s a v i n g s t o many a g e n c i e s because a l l t h e i r t i c k e t s

c o u l d be paid for i n l u m p sum, whereas before i n d i v i d u a l

t r a v e l e r s ' G T R s had t o be p r o c e s s e d and p a i d s e p a r a t e l y .

S a v i n g s from u s e o f b l a n k e t GTRs c o u l d n o t be a t t r i b u t e d s o l e l y

..,.

... .

ATTACHMENT

t o t h e use of t r a v e l a ' g e n t s ; however, t h e t r a v e l a g e n t

e x p e r i m e n t d i d f a c i l i t a t e and e n c o u r a g e t h e u s e o f b l a n k e t G T R s .

Refunds p r e s e n t e d no g r e a t e r p r o b l e m s t h a n e x p e r i e n c e d

b e f o r e t h e tests. Some a g e n c i e s , b u t n o t a l l , r e p o r t e d r e f u n d s

had been p r o c e s s e d f a s t e r by t r a v e l a g e n t s t h a n by t h e a i r l i n e s .

O t h e r s s t a t e d t h a t t h e r e were p r o b l e m s , b u t t h a t t h e y were b e i n g

worked o u t .

O t h e r Droblems c i t e d i n our 1978

r e p o r t appear t o h a v e b e e n s o l v e d

A s w e n o t e d e a r l i e r ( s e e p. 2 o f t h e memorandum), a number

of problems h a v e been c i t e d a s r e a s o n s f o r t h e p r o h i b i t i o n and

t h e s e were m e n t i o n e d i n our 1978 r e p o r t t o t h e H o u s e Committee

on Small B u s i n e s s . The GSA and DOD t e s t s h a v e d e m o n s t r a t e d

t h e s e p r o b l e m s have been s o l v e d .

The commission q u e s t i o n , a s d i s c u s s e d e a r l i e r , h a s been

r e s o l v e d . The c o n t r a c t e d t r a v e l a g e n t s are t a k i n g t h e i r comm i s s i o n s o n government t r a v e l .

Even t h o u g h t h e a i r l i n e s c a n

w i t h h o l d commissions o r p r e v e n t t h e a g e n t s from t a k i n g them,

t h e y have n o t .

T h e r e a p p e a r s t o be no movement t o c h a n g e t h i s

s i t u a t i o n , and w e see none i n t h e f u t u r e .

W e o b s e r v e d no e f f e c t o n t h e l e v e l o f a i r f a r e s c h a r g e d t h e

government o r t h e a v a i l a b i l i t y o f d i s c o u n t s b e c a u s e of t h e payment o f commissions. I f a l l government t r a v e l were booked

t h r o u g h t r a v e l a g e n t s , t h e r e would be an a d d i t i o n a l c o s t for t h e

a i r l i n e i n d u s t r y b u t t h e r e would be a t l e a s t some o f f s e t t i n g

savings.

I n f i s c a l y e a r 1 9 8 2 , government a i r f a r e c o s t s were

e s t i m a t e d t o be $ 1 . 2 b i l l i o n . Using a 1 0 - p e r c e n t commission

f a c t o r , t h e c o s t t o t h e a i r l i n e i n d u s t r y would h a v e been a b o u t

$120 m i l l i o n assuming a l l t r a v e l was booked t h r o u g h t r a v e l

a g e n t s . O f f s e t t i n g t h i s added c o s t , however, would h a v e been

t h e s a v i n g s from ( 1 ) e l i m i n a t i n g t h e e x p e n s e of SAT0 o f f i c e s ,

( 2 ) r e d u c i n g t h e a d m i n i s t r a t i v e and c a r r y i n g c o s t s a s s o c i a t e d

w i t h b i l l i n g and c o l l e c t i n g from government a g e n c i e s , a n d ( 3 )

i m p r o v i n g c a s h f l o w t h r o u g h more e x p e d i e n t payment r e q u i r e d of

t r a v e l agents.

I n o u r b r i e f look a t a i r f a r e s and d i s c o u n t s a v a i l a b l e t o

t h e g o v e r n m e n t , w e have found n o t h i n g t o i n d i c a t e any e f f e c t

caused by t h e payment o f commissions. O u r e v i d e n c e shows t h e

g o v e r m e n t , p a r t i c u l a r l y t h r o u g h GSA's c o n t r a c t a i r l i n e c i t y - p a i r

program, i s p a y i n g v e r y l o w f a r e s f n many markets compared w i t h

f a r e s p u b l i s h e d f o r nongovernment t r a v e l .

There is nothing t o

show t h a t f a r e s o r d i s c o u n t s i n n a r k e t s w h e r e t r a v e l a g e n t s a r e

u s e d a r e a t a n y d i f f e r e n t l e v e l s from t h o s e t h a t a p p l y i n

n o n - t r a v e l - a g e n t markets.

ATTACHMENT

W e h a v e a l r e a d y d i s c u s s e d t h e c o n c e r n a b o u t smaller t r a v e l

a g e n t s h a v i n g t h e f i n a n c i a l c a p a b i l i t y t o w a i t f o r slow-paying

a g e n c i e s . Two e v e n t s h a v e tempered t h a t c o n c e r n . F i r s t , a s

p o i n t e d o u t e a r l i e r , t h e C o n g r e s s e n a c t e d t h e Prompt Payment A c t

( P u b l i c Law 9 7 - 1 7 7 , May 2 1 , 1 9 8 2 ) , which r e q u i r e d a g e n c i e s t o

pay t h e i r b i l l s i n 30 d a y s o r e l s e f a c e i n t e r e s t c h a r g e s .

Second, i n 1 9 8 3 , GSA began a c r e d i t c a r d t e s t program whereby

c e r t a i n f e d e r a l t r a v e l e r s are i n s t r u c t e d to u s e s p e c i f i c a l l y

i s s u e d c r e d i t cards f o r b u y i n g o f f i c i a l t r a n s p o r t a t i o n . T h i s

program, t o t h e e x t e n t implemented by f e d e r a l a g e n c i e s , t r a n s f e r s much o f t h e slow payment p r o b l e m from t h e t r a v e l a g e n t s t o t h e c r e d i t c a r d company.

P r o b l e m s r e l a t e d t o a l l o c a t i n g b u s i n e s s among t h o u s a n d s o f

t r a v e l a g e n t s h a v e been a v o i d e d by h a v i n g GSA and DOD c e n t r a l l y

c o n t r a c t f o r a g e n t s through t h e formalized procurement regulat i o n s . W h i l e t h i s a d d s a n a d m i n i s t r a t i v e e x p e n s e , i t h a s promoted f a i r n e s s .

The c o n c e r n about a g e n t s ' p r o m o t i o n a l e f f o r t s i n f e d e r a l

b u i l d i n g s h a s been t e m p e r e d , p a r t i c u l a r l y i n t h e GSA program, b y .

l e s s e n i n g t h e need f o r a g e n t s t o l o c a t e i n f e d e r a l b u i l d i n g s .

GSA's r e c e n t s o l i c i t a t i o n s h a v e welcomed i n t e r e s t by a g e n t s

w a n t i n g t o s e r v e f e d e r a l customers from nongovernment

f a c i l i t i e s . If t h e a g e n t s are l o c a t e d o u t s i d e t h e f e d e r a l

p r o p e r t i e s , t h e r e are fewer o p p o r t u n i t i e s f o r promotional

activities.

Adequate a u d i t t r a i l s are b e i n g m a i n t a i n e d

Concern had been e x p r e s s e d t h a t t h e u s e o f t r a v e l a g e n t s

would n o t p r o v i d e adequate a u d i t t r a i l s . Of p a r t i c u l a r c o n c e r n

w a s t h a t t h e government c o u l d n o t t e l l w h e t h e r i t was p a y i n g

o n l y f o r i t s own t r a v e l e r s ' t i c k e t s , that i t w a s p a y i n g o n l y €or

t h o s e t r a v e l e r s ' o f f i c i a l t r a v e l , and t h a t i t was p a y i n g t h e

lowest f a r e s . W e found t h a t t h e r e were adequate, t h o u g h n o t

n e c e s s a r i l y uniform, a u d i t t r a i l s .

Both t h e GSA and DOD c o n t r a c t s s p e l l o u t how a g e n t s a r e t o

b i l l t h e government. Each a g e n c y r e q u i r e s a g e n t s t o p r e p a r e

s t a n d a r d form i n v o i c e s , keyed t o e a c h GTR number, and documentat i o n , i n c l u d i n g a l l t r a v e l e r s ' names, o r i g i n s and d e s t i n a t i o n s ,

t i c k e t numbers, and t i c k e t p r i c e s . A g e n c i e s i n many cases have

n e g o t i a t e d , or a t l e a s t r e a c h e d a g r e e m e n t , w i t h a g e n t s t o prov i d e some a d d i t i o n a l d a t a . The c o n t r a c t s a l s o r e q u i r e t h e cont r a c t o r s t o p r o v i d e f a r e d a t a on a l l t i c k e t s i s s u e d so t h a t t h e

fares c a n be a u d i t e d by GSA's O f f i c e of T r a n s p o r t a t i o n A u d i t ,

t h e f e d e r a l g o v e r n m e n t ' s a u d i t o r of t r a n s p o r t a t i o n c h a r g e s .

B a s i c a l l y , t h i s r e q u i r e m e n t is m e t by h a v i n g c o n t r a c t o r s a t t a c h

copies of all t i c k e t s t o t h e i n v o i c e s s u b m i t t e d f o r payment.

The p a y i n g a g e n c i e s t h e n s u b m i t t h e s e c o p i e s a l o n g w i t h t h e p a i d

v o u c h e r s t o GSA for a u d i t .

ATTACHMENT

Travel agent d e f a u l t s '

Despite a n o v e r a l l s u c c e s s f u l program, G S A d i d e x p e r i e n c e

two c o n t r a c t o r d e f a u l t s . T h e D a v i s Agency, I n c . , o n S e p t e m b e r

1 7 , 1982, d e f a u l t e d a b o u t 5 months a f t e r t h e t e s t s began.

This

d e f a u l t t h r e a t e n e d t h e e n t i r e experiment. N e v e r t h e l e s s , it

s e r v e d a v a l u a b l e l e a r n i n g e x p e r i e n c e f o r GSA.

I n G S A ' s f i r s t s o l i c i t a t i o n o n S e p t e m b e r 15, 1981, t h e

D a v i s Agency, I n c . , o f A r l i n g t o n , V i r g i n i a , won c o n t r a c t s f o r

s e r v i n g s e v e n o f t h e e i g h t s i t e s : Denver, R e s e a r c h - T r i a n g l e

P a r k , and f i v e s e p a r a t e l o c a t i o n s i n W a s h i n g t o n , D.C.

D a v i s had

t o e s t a b l i s h new o f f i c e s and s t a f f and e q u i p them f o r a n e a r l y

1982 s t a r t . About 40 new p e o p l e were h i r e d i n t h e W a s h i n g t o n ,

D.C.,

area alone. Only t w o o f f i c e s opened o n t i m e o n A p r i l 1 ,

1982, and t h e y were managed by new p e r s o n n e l .

Davis i n s t a l l e d

new a i r l i n e r e s e r v a t i o n s y s t e m s w i t h which t h e new s t a f f were

n o t e n t i r e l y f a m i l i a r . I t had t o i n s t a l l new t e l e p h o n e systems

which a r r i v e d l a t e and r e q u i r e d d e b u g g i n g .

The t i m e i n v e s t e d by D a v i s ' p e r s o n n e l i n t r y i n g t o meet t h e

o p e n i n g d e a d l i n e l e f t l i t t l e t i m e f o r l e a r n i n g t h e Federal

T r a v e l R e g u l a t i o n s and GSA t r a v e l p r o g r a m s o r e s t a b l i s h i n g

a d e q u a t e b i l l i n g and payment p r o c e d u r e s .

P e r h a p s t h e worst

problem was t h e u n a c c e p t a b i l i t y of D a v i s ' own t i c k e t s t o c k .

D a v i s had c h o s e n t o u s e i t s own s t o c k a s opposed t o t h e

u n i v e r s a l l y a c c e p t e d A i r T r a f f i c C o n f e r e n c e s t o c k . When D a v i s

opened f o r b u s i n e s s , most major a i r l i n e s t h a t had p r e v i o u s l y

honored i t s t i c k e t s t o c k c a n c e l e d t h e i r i n t e r l i n e a g r e e m e n t w i t h

D a v i s . When c a r r i e r s r e f u s e d t o a c c e p t D a v i s ' t i c k e t s , many

t r a v e l e r s were f o r c e d t o use cash o r issue i n d i v i d u a l G T R s .

Inexperienced personnel using unfamiliar r e s e r v a t i o n

s y s t e m s and i s s u i n g t i c k e t s o n u n a c c e p t a b l e stock l e d t o a

p r e l i m i n a r y n o t i c e o f d e f a u l t o n A p r i l 1 6 , 1982, l e s s t h a n a

month i n t o t h e o p e r a t i o n . C o m p l a i n t s from c l i e n t a g e n c i e s o v e r

e r r o n e o u s r e s e r v a t i o n s and d i s c o u r t e o u s s e r v i c e began t o mount.

D a v i s r e s p o n d e d 1 0 d a y s l a t e r and a d d r e s s e d some o f t h e p r o b l e m s

t e m p o r a r i l y , i n e f f e c t b u y i n g more time t o correct o t h e r s . The

c o n t i n u a t i o n of c o m p l a i n t s , t h e t h r e a t o f t h e E n v i r o n m e n t a l

P r o t e c t i o n A g e n c y ' s w i t h d r a w a l from t h e program i n J u n e , and t h e

d i s c o v e r y o f D a v i s ' f a i l u r e t o b i l l i t s c l i e n t a g e n c i e s was

s l o w l y p u s h i n g G S A toward i t s f i r s t d e f a u l t . The f i n a l blow

came on S e p t e m b e r 17, 1 9 8 2 , s h o r t l y a f t e r A i r T r a f f i c C o n f e r e n c e

o f f i c i a l s p u l l e d t h e i r t i c k e t s t o c k and v a l i d a t i o n p l a t e s from

t h e C r y s t a l C i t y , V i r g i n i a , offices of Davis.

D a v i s had been

s e v e r a l weeks and a c o u p l e of m i l l i o n d o l l a r s b e h i n d o n i t s

a c c o u n t . On S e p t e m b e r 17 GSA d e c l a r e d t h a t D a v i s had d e f a u l t e d

s i n c e it could no l o n g e r d e l i v e r a c c e p t a b l e tickets.

The D a v i s e x p e r i e n c e was c o s t l y t o t h e c r e d i b i l i t y o f t h e

t r a v e l c e n t e r program a n d , i n p a r t i c u l a r , t h e u s e of t r a v e l

--.

-r

ATTACHMENT

a g e n t s . N o n e t h e l e s s , ' l e s s o n s were l e a r n e d . GSA no l o n g e r

awarded m u l t i p l e c o n t r a c t s t o a s i n g l e a g e n t as a g e n e r a l r u l e .

B i l l i n g and payment p r o c e d u r e s were worked o u t and g e n e r a l l y p u t

i n w r i t i n g . GSA g r a d u a l l y moved away from a g e n c y i n - h o u s e

o p e r a t i o n s by t r a v e l a g e n t s , t h u s r e d u c i n g s t a r t - u p t i m e and

p r o b l e m s . However, t h e D a v i s Agency was n o t e x c l u s i v e l y a

t r a v e l a g e n t , b u t was a n i n d i r e c t a i r c a r r i e r . We b e l i e v e t h i s

was a f a c t o r i n c a u s i n g t h e m u l t i t u d e o f p r o b l e m s e x p e r i e n c e d by

GSA and t h e cause f o r i t s e v e n t u a l d o w n f a l l as a t r a v e l a g e n t .

I n Warren, M i c h i g a n , DOD e n c o u n t e r e d i d e n t i c a l p r o b l e m s

w i t h t h e D a v i s Agency. D a v i s had won D O D ' s f i r s t c o n t r a c t o n

August 2, 1982. T h e r e were u n a c c e p t a b l e d e l a y s , unanswered

t e l e p h o n e c a l l s , l a t e t i c k e t s , e r r o n e o u s t i c k e t s , and g e n e r a l l y

p o o r s e r v i c e . A c c o r d i n g t o MTMC's i n t e r i m e v a l u a t i o n r e p o r t ,

D a v i s ' c o n t r a c t was almost t e r m i n a t e d b e f o r e t h e t e s t was a

month o l d b e c a u s e of s t a r t - u p p r o b l e m s . Two n o t i c e s f o r

improvement were s e n t t o D a v i s on O c t o b e r 15 and November 8 ,

1982, c i t i n g d e f i c i e n c i e s i n its performance.

The a g e n c y d i d commit a d d i t i o n a l resources and s t a f f i n g a t

t h e Warren s i t e . I t a l s o changed o w n e r s h i p . Under t h e new

owner, Warren D a v i s A g e n c y , ' I n c . , t h e s i t u a t i o n r a p i d l y improved

and MTMC n a r r o w l y e s c a p e d a d e f a u l t .

G S A ' s s e c o n d d e f a u l t came when P a s s p o r t T r a v e l f a i l e d t o

o p e n f o r b u s i n e s s i n Oklahoma C i t y o n J u l y 2 1 , 1983. P a s s p o r t

a d v i s e d GSA t h a t e q u i p m e n t p r e v i o u s l y s c h e d u l e d f o r i n s t a l l a t i o n

had y e t t o a r r i v e . On s e v e r a l o c c a s i o n s , Passport g a v e G S A

a s s u r a n c e s r e g a r d i n g t h e p u r c h a s e and i n s t a l l a t i o n o f e q u i p m e n t

a t t h e Oklahoma C i t y s i t e . On August 2 , 1983, G S A s e n t P a s s p o r t

a notice t o improve. Passport was g i v e n 1 0 d a y s t o h a v e t h e

n e c e s s a r y e q u i p m e n t i n s t a l l e d and r e a d y f o r o p e r a t i o n . However,

i t c o u l d n o t d e l i v e r o n t i m e and d e f a u l t e d o n August 1 6 , 1983.

L o g i s t i c s seemed t o b e a major p a r t o f t h e problem. P a s s p o r t ' s

home o f f i c e was located i n O v e r l a n d , Kansas, a s opposed t o

Oklahoma C i t y o r anywhere n e a r b y .

Consequently, c o n s i d e r a b l e

time was r e q u i r e d t o open a b r a n c h o f f i c e . I t t o o k 3 0 t o 9 0

d a y s a l o n e t o acquire ATC a c c r e d i t a t i o n , n o t t o m e n t i o n

p r o c u r i n g and i n s t a l l i n g new e q u i p m e n t .

CONCERNS R A I S E D BY THE A I R

TRANSPORT A S S O C I A T I O N

On December 20, 1983, ATA wrote t o u s r a i s i n g c o n c e r n s

a b o u t t h e GSA and DOD tests and o u r e v a l u a t i o n o f them. W e had

b r i e f e d ATA o f f i c i a l s about o u r e v a l u a t i o n i n October 1983 and

had m e t w i t h them a g a i n i n November.

A s y n o p s i s of these

comments and o u r e v a l u a t i o n follows.

.l-

... -

. .--*

- r'

ATTACHMENT

ATA u r g e d w e compare S A T O s w i t h t r a v e l a g e n t s

ATA wrote :

"The t r a v e l service and t r a n s p o r t a t i o n s y s t e m p r o v i d e d

by t h e s c h e d u l e d a i r l i n e i n d u s t r y t h r o u g h t h e Scheduled A i r l i n e s T r a f f i c O f f i c e ( S A T O ) program m u s t b e

compared t o t h e t r a v e l a g e n t a p p r o a c h . T h i s comparat i v e a n a l y s i s of t h e SATO program and t r a v e l a g e n t

a p p r o a c h s h o u l d a d d r e s s t h e impact o n t h e g o v e r n m e n t

t r a n s p o r t a t i o n s e r v i c e s program i n t h e a r e a o f e f f i ciency, e f f e c t i v e n e s s , a d m i n i s t r a t i v e burdens, audit

t r a i l , a d d i t o n a l costs, c e n t r a l i z a t i o n and s t a n d a r d i zation."

W e have c o n s i s t e n t l y a d v i s e d a l l i n t e r e s t e d p a r t i e s d u r i n g

o u r work t h a t o u r o b j e c t i v e was n o t t o compare o n e s y s t e m of

procurement w i t h a n o t h e r , b u t r a t h e r t o determine t h e f e a s i b i l i t y of t h e g o v e r n m e n t ' s u s i n g t r a v e l a g e n t s . W e d i d b r i e f l y

l o o k a t a SATO d u r i n g o u r e v a l u a t i o n and o b t a i n e d a n i n s i g h t

i n t o i t s o p e r a t i o n s . We m e t w i t h t h e p e o p l e u s i n g t h e SATO, and

t h e y were s a t i s f i e d w i t h i t s a c t i v i t i e s . T h e r e a r e o t h e r

systems B e s i d e s SATO. T h e s e i n c l u d e CATOs and i n - h o u s e

employee-run t r a v e l o f f i c e s . W e made no c o m p a r i s o n s b e t w e e n

t r a v e l a g e n t s and them e i t h e r .

What w e d i d look a t w a s w h e t h e r problems were b r o u g h t o u t

d u r i n g t h e tests t h a t would w a r r a n t k e e p i n g t h e t r a v e l a g e n t

p r o h i b i t i o n i n place.

ATA q u e s t i o n e d t h e scope o f

the interim evaluation

ATA f u r t h e r s t a t e d :

"The t o t a l GSA t e s t r e s u l t s s h o u l d be c o n s i d e r e d by

GAO, i n i t s e v a l u a t i o n process.

The GSA i n t e r i m

e v a l u a t i o n o n l y c o v e r e d a small p o r t i o n o f t h e

t h i r t y - o n e ( 3 1 ) t r a v e l a g e n t s now i n o p e r a t i o n .

F u r t h e r m o r e , t h e e v a l u a t i o n was based on o n l y s i x

( 6 ) months o f t h e t w e n t y - € o u r ( 2 4 ) month t e s t .

The

remaining e i g h t e e n ( 1 8 ) months, i n c o r p o r a t i n g t h e

r e s u l t s o f a l l t r a v e l a g e n t t e s t s c o u l d have a s i g n f i c a n t impact o n t h e f i n a l GAO d e c i s i o n . "

We u s e d G S A ' s i n t e r i m e v a l u a t i o n a s t h e f o u n d a t i o n f o r o u r

work. T h a t r e p o r t c o v e r e d o n l y t h e f i r s t p a r t of t h e t e s t . W e

expanded o n t h a t r e p o r t by i n v e s t i g a t i n g t r a v e l a g e n t a c t i v i t i e s

c o v e r i n g t h e t i m e from S e p t e m b e r 1982 t h r o u g h S e p t e m b e r 1983.

W e b e l i e v e w e h a v e c o v e r e d t h e major p a r t of t h e 2-year t e s t .

O u r o n s i t e v i s i t s t o a g e n t s were i n September 1983. W e found

.-r-;

8 .

. ATTACHMENT

ATTACHMENT

nothing to indicate there would be anything different in the

tests between September 1983 and April 1984, and we have kept in

contact with GSA and DOD since September 1983.

ATA also wrote:

"GAO policy direction should be provided relative to

the government's management of the SATO and travel

agent program, if the prohibition is lifted. This

policy should address the preservation and uninterrupted continuation of the existing GSA and DOD

Scheduled Airlines Traffic Office (SATO) programs,

under appropriate Memoranda of Understanding.

Further, with respect to new travel management

centers, ensure that the airline industry, through

the SATO program has an equal opportunity to compete

for future contract awards."

We believe it is up to GSA and DOD to determine if SATOs

make sense.

ATA wanted us to expand our

analysis to other areas

Finally, ATA wrote:

"Expansion of the GAO analysis to include other

important issues relative to the travel agent

program, as we have outlined in the accompanying

correspondence

These other issues relate first to our evaluation factors.

ATA stated that we ought to substitute the following for those

factors.

Is the travel agent's approach as efficient and

effective for the government as the industry's SATG

program?

"1.

Is the travel agent approach as conducive to

standardization and availability of total airline

industry resources as the SATO program?

"2.

"3.

Pursuant to government policy, a large ingredient

in servicing the government travel requirements is

the capability of the system to provide national defense

and emergency transportation services for

ATTACHMENT

both passenger and cargo. Is the travel agent

approach as capable of providing these services as

the SATO program?

Does the travel agent approach provide indirect

and direct cost savings to the government equal to

that provided by the SATO program?"

"4.

Other areas it felt were worth considering included:

...

not only will the increased costs of doing

business with travel agents result in increased

transportation costs for the government, but

depending on the magnitude of these costs, which

correlate positively with the travel agent share of

government market, the airlines may find it economically impossible to maintain two distribution systems

( S A T O and travel agent) to service the government."

We do not believe we need to comment on this. Our purpose

in the evaluation was simply to determine the feasibility of

using agents.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.