# UNITED STATES GOVZRNh4EW

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Agao%3A7e3ca1ae6c29bdf5

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED STATES GOVZRNh4EW

GENERAL ACCOUNTING OFFICE

Memorandum

MAR 2 6 1984

THRU

:

Comptroller General
General Counsel

FROM

:

Director, NSIAD - Prank C. Conahan

TO

-

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
2

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).
3

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
4

i

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

5

ATTACHMENT I

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,

1

ATTACHMENT

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.

2

ATTACHMENT

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:

3

. .

c
1

.

.. .
1-

'

I.

s

-

7

1

ATTACHMENT

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.
4

. -' .
.

I

. . .'
I.

, .

,

ATTACHMENT

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.

5

.

ATTACHMENT

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.

6

.

.

E
1

,

r.

.

,

.

.- . ,

.

.

-

I

8

. 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 .
In
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

7

..
L

. *

.

. .
'1.

1 '

z

ATTACHMENT

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.
On
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 .
8

..

.

. .. I.

'I

ATTACHMENT

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.
9

ATTACHMENT

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:
10

1

.\

.

.

I .

I

ATTACHMENT

ATTACHMENT

--A

1.

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.

2.

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.

3.

Total transportation charges for the agency, for'
the billing period, and for the year to date.

quarterly summary of billing data indicating:
1.

Total number of official travelers using the
contractors' services, by agency.

2.

Percentage of official travelers, by agency,
using the airline contract program or Amtrak
discount

.

--A

3.

Estimated cost savings (calculated by the
difference between the regular coach fare and
the discount fare), achieved by the program.

4.

The number of working days between contractor
billings and receipt of payment, by agency.

5.

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.
11

'

I

. I

'

,

I

..

.
1

.

ATTACHMENT

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
12

ATTACHMENT

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
13

ATTACHMENT

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.

14

.

ATTACHMENT

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.
15

. I ..

.

. .

.
.

' L

ATTACHMENT

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 . "
16

I

I

.

.

..
.

L

. 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.

17

I

4

.

.

...
ATTACHMENT

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 .

18

-

ATTACHMENT

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.

19

ATTACHMENT

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

20

.

I

..,.

... .
'

ATTACHMENT

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.
21

~

ATTACHMENT

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 .
22

.

ATTACHMENT

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
23

--.

-r

i"
'

ATTACHMENT

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.

24

.l-

... -

. .--*

- r'

L

ATTACHMENT

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

25

.e
.

.-r-;
8 .

t

. 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

26

ATTACHMENT

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.

27

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Agao%3A7e3ca1ae6c29bdf5. Public record. Not legal advice.