Aug 29, 2007
Menlo Worldwide. Menlo Worldwide is the winner of the DTCI contract awarded by the US Dept. of Defence (DoD) for all Continental US (CONUS) logistics. DTCI is a huge contract not only to win (which was the easy part) but it’s going to be a challenging one to execute as well,
Under the contract, which is potentially worth $1.6 billion, Menlo will be responsible for deploying and operating an integrated logistics solution for shipment planning, optimization, shipment execution and overall transportation resource management governing all Department of Defense (DOD) materiel shipments moving into and among DOD facilities in the 48 contiguous United States.
They should be congratulated. Their team was as follows:
Menlo Worldwide is prime contractor for DTCI in partnership with the following principal subcontractors:
- Computer Sciences Corp. (CSC), which will provide IT infrastructure hosting, network management and integration services;
- ONE Networks Enterprises, Inc., which will provide the transportation management software for shipment planning, optimization and execution, and;
- Olgoonik Logistics, which will provide professional services supporting the participation of minority-owned and small business firms as service contractors for DTCI.
DTCI was a project that I worked on in my previous firm GENCO for a considerable amount of time – it was a stretch experience for me and so I truly enjoyed it. I blogged about it previously here – Uncle Sam’s looking for a few good bids (Something I worked on)
What I didn’t know then and I know now is the composition of the teams that competed for the project. I didn’t know the teams because the DTCI project was split up into an analysis component which GENCO competed on and won and the execution component which Menlo (or rather Con-Way Inc) has just won.
Even though DTCI was and remains tight lipped about the proposals it recieved, at least four of them are in the pubic domain as highlighted by Defense Industry Daily in their article – DTCI: Changing Military Shipping in the USA – and Beyond.
The four competitors were:
Solo effort. Why? Sure, CH Robinson is a large 3PL but trying to take on a US government contract all by itself smacks of inexperience in dealing with the US government. Or so I opine. While the US DoD might be trying to bring in private parties to help manage its logistics, it doesn’t imply that the modus operandi of the US govt. has changed regardless of what the political appointees of the day try willy nilly. It is a costly lesson to learn.
A very focused team with clear competencies in focused areas all integral to the execution of such a challenge. I would hazard a guess that this is one of the prime reasons that they won. Small business is a big concern for the US government and that’s why Olgoonik Logistics figures in the team as well.
The team included Con-Way and:
- Computer Sciences Corp. (CSC) will provide IT infrastructure hosting, network management and integration services;
- ONE Networks Enterprises, Inc. will provide the transportation management software for shipment planning, optimization and execution, and;
- Olgoonik Logistics will provide professional services supporting the participation of minority-owned and small business firms as service contractors for DTCI.
IBM’s failed stab at being a 4PL? The pertinent question here is whether the US DoD would be willing to transfer the DTCI contract from the 3PL (Third party logistics) to the 4PL (Fourth party logistics) domain. Bureaucracies in and of by themselves tend to minimize risks as much as possible and my guess would be that the levels of risks escalate in moving from a 3PL to a 4PL kind of operation. Continuing in that vein, IBM was simply the wrong prime (What exactly is IBM’s logistics competency?) for the contract and moreover what are companies such as APL (this is one of the top global 3PL providers) doing in a CONUS (CONtinental US) bid? The other factor that might have sunk this team is simply the size of this team (any of these players dropping the ball would mean a serious logistics problem for the US DoD). There is also a possibility that some of the players on the team are quite well known to the Defense establishment especially those that have previous experience with USTC and DoD. The DTCI is fundamentally an effort to inject new ideas from the corporate logistics world into the Defense logistics operations – it was never pushed as an effort to reorganize/recast the executioners of the contract with the same ol’ same ol’.
IBM’s Team was derived from their own corporate logistics network, and included firms like UPS, and UPS- SCS, FedEx, Menlo Worldwide, Maersk, Eagle Logistics, CSX, Panalpina, APL, and Schneider National; but IBM would be running the show and assigning carriers. Their team also included:
- Anteon (General Dynamics), a leading systems integration company;
- APL Logistics (a sister company of APL, one of the top 3 global logistics providers), providing end-to-end logistics services for global customers;
- FSG, an innovative software engineering small business, delivering C2 and transportation management system solutions to USTC and DoD;
- Horizon Services Group (a wholly-owned subsidiary of Horizon Lines, America’s leading Jones Act container shipping and integrated logistics company), a technology solutions company for transportation management and supply chain security;
- MEB Consulting LLC, a small consulting business, specializing in supply chain management and customer relationship management, and implementing transportation management solutions for DLA;
- PRTM, a premier operational strategy and business process consulting firm;
- Schneider Logistics, a wholly-owned subsidiary of Schneider National, a premier provider of truckload, logistics and intermodal services;
- Sumaria, an innovative information technology and professional services small business, delivering data management and other operational support to USTC and DoD.
But in my honest evaluation, this team is a 4PL effort and that is a step too far too early.
One of the strong contenders for the contract. UPS seems to have assembled a solid team and they have extensive dealings with the US DoD in any case. They even chose SAIC which is a well known defense contractor in their team. I’m not really sure why this bid failed but it could possibly have to do with team size and how they presented the team to the DTCI contracting office. While there are exception transportation providers in the list, what I did find missing was a transportation management organization that could continually provide real-time execution support as well as feedback support. If you look at the Con-Way team, you observe ONE Networks Enterprises playing that role and in the IBM team – FSG, Summaria & Horizon playing that role in several aspects. Perhaps UPS was relying on SAIC for this part of the execution which might be the failure link but who knows for sure.
UPS Team. UPS chose Science Applications International Corporation (SAIC), known for its defense logistics, security and technology integration systems, as the primary subcontractor. Other Team UPS companies include:
- American Road Lines Inc. (TTC-II contractor), a nationwide agent network trucking firm providing DoD transportation of general commodities, as well as specialized loads.
- Amyx, Inc., an established woman-owned, 8(a) certified business that provides program integration, project management, supply chain management and information technology solutions.
- Boyle Transportation, which specializes in transportation protective services to the defense industry, requiring exceptional security and utmost care.
- CorTrans Logistics, LLC (TTC-II contractor), a minority-owned small business provider of transportation and logistics services utilizing multi-modal independent agents and carriers.
- Crowley Maritime Corporation, a diverse worldwide marine transportation and international logistics services company.
- CRST International (TTC-II contractor), one of the nation’s largest privately-held transportation companies, providing services through CRST Logistics, CRST Malone, CRST Premier Transport and CRST Van Expedited.
- Green Valley Transportation (TTC-II contractor), general commodities, asset-based, specialty and HAZMAT carrier with 35 years of broad based experience and equipment. It is a DoD-qualified munitions carrier and holds a National Hazardous Material Certification.
- IntelliTrans, a provider of consulting services, software products, integration services and inventory tracking for the entire rail industry.
- Landstar System, Inc. (TTC-II contractor), provider of specialized transportation services to a broad range of customers worldwide through independent agents and third-party transportation capacity providers. Landstar has a long history of transport services to DoD including AA&E, over-dimension and FAK.
- Mercer Transportation Company (TTC-II contractor), a truckload carrier of general commodities operating flatbed, dry van, drop deck and specialized equipment throughout North America.
- Norfolk Southern Railway, a subsidiary of Norfolk Southern Corporation, serving every major container port in the eastern United States and providing connections to western rail carriers. Norfolk Southern is North America’s largest rail carrier of automotive parts and finished vehicles.
- Red Arrow, a woman-owned, non-asset based carrier that provides flatbed, step deck, RGN and van shipments, both truckload and less than truckload.
- UTXL, Inc. (TTC-II contractor), provides expedited door to door, LTL, TL services and coverage for seasonal or unexpected surge for commercial and military customers utilizing a large portfolio of small business certified carriers.
- YRC Worldwide Inc., a Fortune 500 company and the holding company for Yellow Transportation (TTC-II contractor), Roadway Express (TTC-II contractor), YRC Regional, among others.
I’m glad to see the DTCI initiative go forward and I wish the executioners of this project well because it is a serious challenge and I hope they succeed. The numbers are staggering as the DID article itself reports:
DTCI includes a base period of performance (POP) of 3 years worth $525 million, with only $30 million or so in calendar year 2007, followed In addition, there are two possible 1-year option periods (about $543 million for both), and two 1-year award term option periods (about $567 million for both), allowing for a possible 7-year contract. The not-to-exceed (NTE) rates were established for the base period of performance with the contract award, and a mechanism exists for fuel price adjustments within the contract due to their volatility. The not-to-exceed rates will also be somewhat flexible; they will be renegotiated in Year 3 for the Years 4 & 5, and renegotiated again in Year 5 for Years 6 & 7.
DTCI is also a performance-based contract, with a combination of potential bonuses (up to 10% of the coordination management fee) for meeting or exceeding stated goals, and a complex scale of penalties if timeliness and other quality metrics are below the benchmark standards. Award fees will be assessed semi-annually, and a modification issued for any award fee earned.
And the scale of the implementation is on a magnitude even larger. There are three phases in this contract and I’ve put down only Phase 1 here:
Phase I includes 18 DLA distribution centers stateside and will be completed within 22 months. This phase will create improved processes that reduce cycle times (the time from request for materiel movement to delivery), increase operational effectiveness, improve customer confidence, and increase efficiencies. DTCI’s first phase will show a cost savings by using a single-touch transportation provider for stateside freight. The 18 locations involved, in order of scheduled addition, are:
DDBC – Barstow, CA
DDCT – Corpus Christi, TX
DDPW – Puget Sound, WA – award + 165 days, followed by program management review (PMR)
DDDC – San Diego, CA
DDRT – Red River, TX
DDJC – San Joaquin, CA – award + 265 days, followed by PMR
DDOO – award + 12 months – Oklahoma City, OK
DDHU – award + 13 months – Hill AFB, UT
DDSP – award + 14 months – Susquehanna, PA
DDNV – award + 15 months – Norfolk, VA
DDAG – award + 16 months – Albany, GA
DDJF – award + 17 months – Jacksonville, FL
DDAA – award + 18 months – Anniston, AL
DDTP – award + 19 months – Tobyhanna, PA
DDWG – award + 20 months – Warner Robins, GA
DDCN – award + 21 months – Cherry Point, NC
DDRV – award + 22 months – Richmond, VA
Defense Mapping Agency, Richmond, VA – award + 22 months
Like I said, getting through Phase 1 itself is going to be one heck of a challenge. Perhaps, in a later post, I’ll refer to Phases II and III. I’m just happy today in a queer sort of happiness way.