Senators Urge Pentagon to Address Millions in Late Fees from Leased Shipping Containers

WASHINGTON – Sens. Tom Carper (D-Del.), Tom Coburn (R-Okla.) and Scott Brown (R-Mass.) sent a letter to the Department of Defense requesting the Department to issue plans to curb nearly $720 million in late fees for leased shipping containers used for delivery of parts, supplies and other items for overseas contingency operations.

In the letter to Deputy Secretary of Defense Ashton Carter, the Senators ask that the Department consider making necessary changes to reduce the late fees and the cost of leasing shipping containers while it writes a new universal contract for all such leases. They note that the incurred costs result from both the cost of the late fees, as well as the cost of the leases themselves. At times the late fees have even been more costly than if the containers were bought outright.

“We recognize that the leasing of containers is an option that makes sense, but this wasteful financial situation calls out for better contract negotiations, oversight and management to avoid these costly late fees,” wrote the Senators.

As Chairman of the Subcommittee on Federal Financial Management and a veteran, Sen. Carper has focused on the ongoing – and growing – issue of wasteful spending and inadequate financial management within the Department of Defense for years. In October of this year, Sen. Carper wrote to Secretary of Defense Leon Panetta to encourage the Secretary to save millions of dollars in the Department’s budget by first tackling waste, fraud and abuse – generating substantial savings from the DOD’s budget without causing undue harm to servicemembers or their families

The text of the letter follows:

December 13, 2011

The Honorable Ashton B. Carter, PhD
Deputy Secretary of Defense
U.S. Department of Defense
1000 Defense Pentagon
Washington, DC 20301

Dear Dr. Carter:

We are writing about an important opportunity for the Department of Defense to end a financially wasteful practice, which could result in hundreds of millions of dollars in savings.

Given the serious financial challenges posed by our massive federal debt and deficit, all aspects of federal spending, including of the Department, are facing the prospect of substantial reductions. As a result, we need to look in every nook and cranny of the Department’s budget, along with those of all federal agencies, to make sure that we are as efficient and cost effective as possible, and are getting the most bang for our buck. Simply put, we need to get better results for less money.

We would like to bring to your attention one specific example of savings that could be achieved through better efficiency and smarter financial management. As part of our nation’s ongoing operations in Afghanistan and other overseas contingency operations, the Department makes use of many tools and transportation systems to deliver spare parts, supplies and other vital materials to our military forces. Common shipping containers are regularly leased from private companies as a part of these deliveries.

It has come to our attention that the Department’s shipping container leases for overseas operations have resulted in hundreds of millions of dollars in late fees for simply not returning the containers on time. This cost for late fees was in addition to the cost of the leases themselves, and at times the late fees have even been more costly than if the containers were bought outright. We recognize that the leasing of containers is an option that makes sense, but this wasteful financial situation calls out for better contract negotiations, oversight and management to avoid these costly late fees.

We, therefore, request that you report to us on your plans to substantially reduce the level of late fees for leased shipping containers used for delivery of parts, supplies and other items for overseas contingency operations. We understand that the Department is in the process of writing a new universal contract for all such leases, which could reflect necessary changes to reduce these late charges and the cost of leasing shipping containers. We ask that your reply to us with such a plan by January 30th.

Thank you for your attention to this matter.

Sincerely yours,

Tom Carper, Chairman
Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security

Tom Coburn M.D., Ranking Member
Permanent Subcommittee on Investigations

Scott Brown, Ranking Member
Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security

###