Travel Contract Has Firms Booking Potential Business

Travel Contract Has Firms Booking Potential Business

By Nick Wakeman
Staff Writer

A lucrative Defense Department award holds out the promise of even bigger money for winner TRW and its teammates as government and commercial spending on travel management swells in the coming years.

The potential market to provide government travel systems is $100 million annually as agencies slash costs by outsourcing support services such as travel management, industry sources said.

Cleveland-based TRW and subcontractors Gelco Information Networks of Minneapolis and American Express of New York won the $264 million contract to build the Defense Travel System (DTS), an electronic travel management system, earlier this month. The team beat one led by Electronic Data Systems Corp. of Plano, Texas. The TRW team originally had been led by systems integrator BDM International Inc., McLean, Va, which TRW purchased last December.

The ground-breaking defense travel contract, a five-year effort with three one-year options, will serve the team well in other ventures, said Richard Fabbre, TRW's program manager for DTS. The automated system is expected to dramatically lower costs and cut reimbursement time and processing steps. It will be "very state of the art," he said.

TRW wants to keep together the team to pursue other projects in the government and possibly commercial markets, he said. Agencies, including the State Department, as well as state governments, cities and universities with large travel budgets are potential markets for similar systems, said William Shively, executive vice president and general manager of Gelco's government division.

Privately held Gelco makes software to manage travel expenses. It is considered a leader in that area, with about 80 agencies and 1,500 companies using its products. Other members of TRW's team include Sun Microsystems Inc., Mountain View, Calif., and Oracle Corp., Redwood Shores, Calif.

Department of Defense estimates have shown up to 30 percent of the $3 billion-plus the Pentagon spends on travel annually is eaten by management costs. Defense officials' goal is to bring that cost in line with the commercial level of 10 percent or less, said Col. Al Arnold, program manager for DTS. When fully operational, DTS will process about 5.9 million travel vouchers, and will save the government about $88 per voucher, or nearly $520 million annually, according to the Defense Department.

Under the defense travel effort, the TRW team will build a system that converts the Defense Department's paper-based travel system to an electronic one. The TRW team will create a "common user interface" that defense personnel can use to access travel services in 18 regions the Defense Department has established worldwide. This interface will allow military personnel to use a Web browser to book airline flights, make hotel reservations and rent cars.

American Express' main role will be to provide reservation services in the Midwest, the first region in which the Defense Department will roll out DTS. A second set of contracts open to travel companies like American Express will be out this summer.

Military and most government travelers face significant differences when compared to their commercial counterparts, Shively said. Government travelers must get authorization before traveling, reimbursement is on a per diem bases rather than an expense account, and there are myriad rules to follow about how to travel and where to stay, he said.

The Defense Department estimates there are about 25 separate steps to go through when traveling. Because all the approvals and authorizations are completed on paper, the Defense Department's cost is very high, Shively said. "The government spends at least three times what the commercial world does to manage travel expenses," he said.

"DoD is convinced this is going to work. That is why they have really taken their time on this to make sure it really does work," said Roxanne Navarra of market research firm Federal Sources Inc., McLean, Va.

"This is one of the first contracts really aimed at improving the business practices of the Defense Department," said Mitchell Ross, vice president of enterprise management for TRW's systems integration group.

The Defense Travel System will be owned and operated by TRW, and the government will pay for it like a service on a per transaction basis, Ross said. Both are new concepts for the government, he said."Historically, the government would have had a developer-contractor, then the government would own and operate the system. It might be good, but it would not keep up with technology."

Because the system will be built using commercially available products, TRW will continually upgrade the system as new technologies become available, Ross said.

Navarra said: "If DoD can implement this, I think other agencies might follow. Everyone wants to get away from paper."

The Defense Travel System itself might become available for civilian agencies to use, but there are no concrete plans for that now, Ross said. One thing, however, is clear: The defense travel project is creating an opportunity to expand the TRW team's presence in the government market.

Gelco gets about 15 percent of its revenue from the government, and DTS should boost that to about 25 percent, Shively said. He would not say what the company's overall revenues are.

The DTS win will "provide us with the opportunity to be an important player in the rest of the federal government," Shively said.