Pentagon to save $23M in U.S. Bank deal over soldiers' effects

WASHINGTON, May 18 (UPI) -- The Pentagon stands to save at least $23 million a year after changing the way it pays the cost of transporting military personnel's effects during redeployment or in response to other logistical needs related to service personnel.

Part of an ongoing cost-cutting operation across the board in government departments the military's saving plan is the result of a deal the Pentagon reached with U.S. Bank, the fifth largest bank in the United States.

The bank said the expected saving would occur because of its expanded relationship with the Pentagon. The U.S. Defense Department has entrusted U.S. Bank with the task of automating payments for the shipment of redeployed personnel's effects, called "non-temporary storage."

By moving to electronic billing and payment of storage and related costs through U.S. Bank freight payment program, U.S. Bank anticipates saving the military services nearly $23 million a year over the current paper-based process.

The government pays storage facilities using paper invoices that can take up to 120 days to process. With U.S. Bank freight payment's automated process, the average turnaround for payment will be reduced to 72 hours, the bank said.

The new agreement expands on U.S. Bank's existing contract with the Defense Department, which covers payment of transportation-related costs connected with service member relocations.

With conflicts continuing in the Middle East and U.S. personnel deployment across the globe a routine occurrence, the savings came as welcome news.

U.S. Bank provides both the Pentagon and its transportation service providers with online access to shipment data as well as analytical reporting tools in addition to payment processing. The bank processed more than 8.2 million invoices for the department last year.

The new system will add further transparency and increase cost-saving opportunities, said Doug Ichiuji, senior vice president and head of government services for U.S. Bank corporate payment systems.

U.S. Bancorp, the parent company of U.S. Bank, had $311 billion in assets as of March 31.

The bank was forged during the 1990s from the combination of several major regional banks, which in turn grew from mergers and acquisitions of smaller banks.

The bank has headquarters in Minneapolis and employs more than 63,000 people.

In January, U.S. Defense Secretary Robert Gates announced the largest reduction in the Pentagon's budget since the Sept. 11, 2001, attacks on the United States. The projected savings effectively froze parts of the budget right through 2016, although officials say funding for combat operations in Iraq and Afghanistan remains largely unaffected.

Gates said at the time the curtailed budget represents "the minimum level of defense spending that is necessary, given the complex and unpredictable array of security challenges the United States faces around the globe."