USA Today August 29, 2011
Pentagon pays $720M in late fees for storage containers
By Tom Vanden Brook
The Pentagon has spent more than $720 million since 2001 on fees for shipping containers that it fails to return on time, according to data and contracts obtained by USA TODAY.
The containers — large metal boxes stowed on ships and moved from port on trucks — are familiar sights on bases in Iraq and Afghanistan where troops use them for storage, shelter and building material. Yet each 20-foot container returned late can rack up more than $2,200 in late fees. Shipping companies charge the government daily "container detention fees" after the grace period ends for the box to be returned.
The $720million represents a thin slice of the Pentagon's $553billion budget. Yet military spending is under intense scrutiny as the Defense Department has been ordered to trim $350billion in spending over the next 10 years and could face steeper reductions from budget cutters.
The cost stems from the mistaken belief that the wars in Afghanistan and Iraq would be brief and late fees would be minimal, said John Pike executive director of Globalsecurity.org, a defense policy group.
"This is real money," Pike said. "And we've spent a lot of it on what amounts to fines for overdue library books."
Late fees peaked in 2004 at $128million. That dropped to $17million in 2008 but has risen with a surge of troops and gear to Afghanistan. In 2010, the Pentagon paid shippers $30million for overdue containers.
Military officials attribute the decline since 2004 to better management, use of more government-owned shipping boxes and caps on the cost of buying delinquent containers, Scott Ross, a spokesman for the Military Surface Deployment and Distribution Command, said.
It's unclear how much shippers charged the Pentagon between 2001 and 2004 because the fees weren't closely tracked, according to the Army. It estimates detention fees for that period totaled at least $300million.
"These are the kinds of things that happen when people are asleep at the wheel," said Winslow Wheeler, a defense analyst at the Center for Defense Information and frequent critic of Pentagon spending practices.
Contracts have been modified in recent years to limit how much the government pays before it owns the container, Ross said. The rates the military pays for late fees compare favorably with those paid by private companies moving cargo, he said.
Still, if the military fails to return a container, a rent-to-own arrangement requires it to pay the shipper nearly $7,400 for a 20-foot container worth $3,200.
The military also has improved its ability to identify containers it wants to keep so it can buy them before paying the maximum in late fees, said Mark Diamond, a spokesman for the distribution command. The Pentagon has also bought a number of containers when it anticipates they'll be used for the long-term.
Maersk Line Limited is one of the top recipients of late fees, according to the Pentagon. "When a container is not returned in a timely manner, carriers miss the opportunity to serve a customer," Kevin Speers, a company spokesman, said . "Detention fees are a common incentive to prompt the on-time return of containers similar to late-fees on a car or movie rental."
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