Aligning Incentives in the Transportation Working Capital Fund Cost Recovery While Retaining Readiness in Military Transportation
During peacetime and wartime, the U.S. Transportation Command (USTRANSCOM) is responsible for moving units, people, equipment, and households by ship, aircraft, rail, and truck for the Department of Defense. The peacetime and wartime movements are interrelated, because many, but not all, customer movements in peacetime are crucial for preparing USTRANSCOM and its components for future wartime requirements. USTRANSCOM utilizes a hybrid working-capital fund (WCF) approach to recover its costs, called the Transportation Working Capital Fund (TWCF). USTRANSCOM charges rates to customers for specific services, such as moving a container by surface transportation or chartering an aircraft to move personnel; these rates include some fixed costs. How these rates are determined varies by the service provided. USTRANSCOM receives revenue from other sources to cover additional costs. Recent efforts by a USTRANSCOM working group found that customers perceive the cost of movements as being too high. This report analyzes adjustments to TWCF cost recovery that could better align customer peacetime decisions with the wartime mission. To recommend a cost-recovery approach that meets this objective and improves transparency, the authors reviewed literature on commercial WCF best practices, analyzed budget and cost data, and interviewed stakeholders. The authors applied lessons learned in these analyses to recommend changes to TWCF cost recovery and examined these changes in the context of five deep-dive case studies.