01 Oct David Vs Goliath
Ben Heller, CEO
Never before has there been more firepower targeted at the moving industry.
The US military is the largest buyer of moves in the world with approximately 300k traditional moves per year. Currently, 70% of these moves are currently managed by a trio of large military move managers. By the end of October, the next chapter will be submitted via RFP to USTRANSCOM, and the DOD is pushing for one company to control all of those moves.
A bidders meeting took place in O’Fallon IL on September 26th, and word is getting out about who is partnering together and preparing bids. The clear leader before any responses have been submitted has to be the team of Amazon, Bechtel, and Northrop Grumman. Any of these companies alone could put together a competitive response, but as a group the potential is intimidating. Amazon has demonstrated their ability to operate at a loss with the goal of dominating an industry in the long term. They are uniquely positioned to monetize service members moves in other ways. Northrup is one of the largest government outsourcing and military technology manufacturers. And Bechtel is the largest construction company in the US.
The industry incumbents’ look underpowered in comparison. The van lines aren’t working together. The largest military move managers appear to be going their own way, some partnering with military outsourcing firms. The largest RMCs were in attendance, and many of the large freight operators are also throwing their hats in the ring. Some seemed there just to voice their complaints.
When USTRANSCOM indicated that one of their evaluation criteria was the ability to handle 50k domestic shipments per month and 35k international shipments per month, the air was sucked out of the room. The capacity of all the current military movers may not even meet that criteria. That’s a level that potentially only Amazon can say they currently perform (in the form of packages).
I was excited for the military to change their program. The current methodology with SCAC codes is ripe with abuse and gamesmanship that doesn’t benefit the Service Member, DOD, taxpayer, or movers that are actually performing the work. But the RFP is structured to eliminate that type of abuse by implementing high levels of control that push an unprecedented level of risk to the movers, especially on international moves. The bidders were informed to include the cost of risk in the form of higher pricing, but as 50% of the evaluation is on the competitive pricing, this has the potential to create losses in later years as non-US market conditions change and increase cost. That will absolutely negatively impact the service member’s experience in the form of poor move quality as the moving supply chain will be required to take the bare minimum for those jobs. Every bidder will fear this risk except a trio like Amazon, Bechtel and Northrop who can accept losing millions for increased revenue and market share.
The bid is due October 28th. The award is scheduled for April 15th 2020. On that date, we’ll know who the industry behemoth will be. And once the monster is created, it isn’t likely to stay limited to military moving.
On the other hand, this isn’t a done deal. The award could be delayed, challenged, and the bid could ultimately be scrapped. But that can’t be counted on. With IAM this week, there is a window of opportunity for the players in our industry to envision and design a level of collaboration that is unprecedented.
PricePoint isn’t going to be a bidder on the USTRANSCOM RFP – we don’t manage moves, we manage pricing. If you see an opportunity to leverage PricePoint to help solve challenges in your RFP, let’s have a discussion and help you put together the best bid possible.