The commissary system is a staple of on-base living and essential for military families stationed in rural areas or overseas. Yet, declining commissary patronage and other factors are edging the system closer to a merger that would put commissaries and exchanges under the same organizational roof.
The commissary system relies upon $1.2 billion of federal funding to provide military families with the benefit of a 26% savings compared with a civilian grocery store. Along with these savings, the Defense Commissary Agency (DeCA) model is designed to provide reliable, nearby goods to military families serving in rural areas or overseas.
DoD is focused on efficiency and lethality, and the $1.2 billion price tag for the commissaries has led some leaders to conclude the benefit is no longer sustainable or essential to the national defense strategy. In efforts to seek cost savings and efficiencies, an endeavor to merge back-office operations of the struggling commissaries with the flourishing military exchanges is underway.
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MOAA and other military service organizations are concerned about the cost of a merger of this magnitude. Senior officials argue that merging the commissaries and exchanges has been studied to death, yet there are compelling reasons why it has not been attempted in the past, including initial merger costs; potential threats to the commissary benefit; worries that the move could put the exchange’s contribution to morale, welfare, and recreation (MWR) funds at risk; and concerns over changes to product inventory at both types of stores.
And about those proposed savings: Recently, the Government Accountability Office (GAO), which has been charged with reviewing the business case analysis (BCA) for the merger, stated it has not been able to corroborate the projected cost savings calculated by Boston Consulting Group, the company that prepared the BCA. At this point, the potential savings do not outweigh the risks of a merger.
There was once the generally accepted thought by servicemembers that “As long as my family is taken care of, I am all in.” With a growing laundry list of on-post scandals (substandard privatized housing partnerships, contaminated water, inadequate child care, and crumbling infrastructure, it is no wonder there is an exodus of patronage from on-post facilities. Unfortunately, the fewer shoppers commissaries have, the more the stores become a target for cuts.
Does DoD want to merge the systems purely to improve the benefit, or do the cost savings, possibly on the backs of military families past and present, play the larger role?
MOAA agrees that modernization is needed in the commissary systems, but they should be focused on improving quality, not just saving money. Senior defense officials claim a merger of back office operations will not impact customer-facing services; however, MOAA believes it is imperative to focus on meeting the needs of customers and increasing foot traffic in addition to potential cost savings from increased efficiencies.
Reform of the commissary system is undeniably needed. In one example, commissaries spend a small fortune on private trucking while the AAFES distribution fleet has achieved lean efficiency. Combining forces could gain savings and improve service. The challenge is that the difference in systems to haul perishable good and AAFES stock items is far more different than apples and oranges. Inventory control and quality assurance measures are vastly different, and the organizations operate on very different and expensive IT systems.
Some lawmakers and others have pressed for full privatization, getting DoD entirely out of the grocery business and turning the keys over to a mega-chain such as Costco or Walmart. These proposals may sound cost-effective, but they would remove or endanger programs run through the existing stores that benefit struggling servicemembers, allow for disaster relief, and provide much-needed MWR support. And without extremely careful oversight, they could put the shopping benefit at risk.
So, what is the way ahead?
While DoD is already on the march to initiate the merger, MOAA believes it should wait until recommendations from an ongoing report are available. A provision in the House version of the FY20 National Defense Authorization Act would delay a merger until Congress reviews the GAO study. Contact your representatives and urge them to put the brakes on this merger until the GAO report is finalized.