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Existing customer concerns focus on the efficiency of the system

• The TWCF is perceived to lack cost-control incentives for USTRANSCOM and, to a lesser degree, customers; lack stability and predictability of charges to customers; and lack simplicity and transparency in its cost-recovery approach.
• The TWCF is also perceived to introduce a need to frequently reprogram funds relating to the Airlift Readiness Account, a funding mechanism through which the U.S. Air Force pays for TWCF expenses that are not covered by customer rates.
• Discussions with stakeholders and an analysis of USTRANSCOM budget data did not raise concerns about the ability of the TWCF to effectively conduct steady-state transportation operations or recover costs.

There was no indication of TWCF funds being used for procurement or modernization efforts that would not otherwise have been funded

• USTRANSCOM has requested that its largest planned procurement effort, the Transportation Management System, be funded outside the TWCF.

U.S. Transportation Command (USTRANSCOM) manages the Defense Transportation System, which provides peacetime transport for U.S. Department of Defense customers and maintains surge capacity required for wartime needs to project and sustain military power. Most of USTRANSCOM's operations are funded by the Transportation Working Capital Fund (TWCF). The National Defense Authorization Act for Fiscal Year 2020 created a requirement for an independent review of the TWCF, with the purpose of assessing the TWCF's current structure and offering recommendations to improve the fund's effectiveness and efficiency through changes to its cost-recovery structure. This report describes that review.

The authors found that improvements to the TWCF are possible. Specific recommendations vary by USTRANSCOM line of business, but, overall, the authors recommend adopting a Variable Cost Pricing model. This model, preferred in the business and economics literature as the best way to guide customer decisionmaking to support enterprise objectives, suggests that customers should pay for the costs that they impose on the system (variable costs) and that other costs should be recovered separately from rates for movements. For most business lines, this model preserves the workload that USTRANSCOM relies on to generate readiness while improving cost-control incentives for both USTRANSCOM and its customers. However, a more detailed analysis of USTRANSCOM business processes, information systems, and personnel requirements is needed to inform implementation decisions.

• Chapter One

  Introduction

• Chapter Two

  Background

• Chapter Three

  Analytic Approach

• Chapter Four

  Assessment of the Current Structure of the Transportation Working Capital Fund

• Chapter Five

  Recommendations to Address Shortfalls

• Chapter Six

  Summary of Findings and Recommendations

• Appendix A

  Course of Action Analysis, by Line of Business