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Commissaries May Be Privatized

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We have all heard someone say “I can get that cheaper off base” when referring to specific items found at the Commissary.  That may be true for some items, but the Defense Commissary Agency (DeCA) strives to provide servicemembers and retirees with an overall savings compared with retailers outside the base.  As the Department of Defense (DoD) looks to save money, it my make sense to privatize the commissary. In the National Defense Authorization Act for Fiscal Year 2016, the plan for the possible privatization is laid out.

20150704_deca4The commissary is a quality of life not only for servicemembers, but also retirees.  In January of 2014, the results of a study conducted by DeCA were released and they showed that shoppers saved an average of 30.5 percent annually.  Unlike previous years that only compared the commissary prices to local grocery stores, this study compared the commissary prices to those in grocery stores, wholesalers such as Sams Club and Costco, convenience stores and other retailers that sell grocery items such as some drug stores.  A 2012 study comparing the commissary only to grocery stores showed an average annual savings of 31.2 percent.

The National Defense Authorization Act for Fiscal Year 2016 contains language which could lead to the privatization of the commissary system. The Veterans of Foreign Wars of the United States  (VFW) announced in May of 2015 that they are against any privatization of the commissary system and they are against the pilot program to test it.  In a statement, the national director of the VFW, John W. Stroud said “Military commissaries are a key quality of life benefit to military service members, their families and to retirees. You can sometimes find better deals off base, but nowhere near the overall 30 percent savings that commissaries provide, plus any reduction in customer traffic at the commissary will have a corresponding reduction in customer traffic at the base exchange, which will directly impact morale, welfare and recreation contributions.”

The plan for privatization

No later than March 1, 2016, the Secretary of Defense must consult with major grocery retailers in the United States and submit a report to the Committees on Armed Services of the Senate and the House of Representatives which sets forth a plan for the privatization, in whole or in part, of the defense commissary system.  This report shall ensure the provision of high quality grocery goods and products,  discount savings to patrons, and high levels of customer satisfaction while achieving savings for the Department of Defense.

As part of the report, an evaluation of the current rates of basic pay and basic allowance for subsistence payable to members of the Armed Forces will be conducted along with an assessment whether such pay and allowance should be adjusted to ensure that members maintain purchasing power for grocery goods and products under the plan.

Not only will the report contain an assessment on the long-term costs or savings to the Department of Defense as a result of the privatization, but it will also include an assessment whether the privatized defense commissary system under the plan can sustain the current savings to patrons of the defense commissary system.

The plan will also assess any impact that privatization would have on all eligible beneficiaries, whether the plan can sustain the continued operation of existing commissaries and if the plan would be feasible for implementation in overseas (OCONUS) commissaries.

The Pilot Program

As soon as possible after the report is submitted to the Committees on Armed Services of the Senate and the House of Representatives, a two-year pilot program will be implemented which will involve not fewer than five commissaries.  These five or more commissaries will be selected from among commissaries in the largest markets of the defense commissary system in the United States.

Online Purchasing of Commissary Items

Online purchases may be included as part of the pilot program for eligible beneficiaries serviced by the commissaries selected for participation in the pilot program.  As part of the pilot program, this would give them the ability to order and purchase grocery goods and products otherwise available through the defense commissary system through the Internet and to receive items so ordered through home delivery.

Privatization delayed

Senators recently passed an amendment to the National Defense Authorization Act for Fiscal Year 2016 which would require a study to be conducted prior to implementing the pilot program in at least five commissaries.  The concern is that the pilot programs will force a significant change to the commissary benefits of those serviced by the privatized commissaries.

Regardless of the delay, the writing is on the wall and changes are coming.  The DoD needs to save money and with the commissaries are costing the DoD $1.4 billion a year to operate. Changes to the commissary system could mean significant savings for the DoD.  According to the DeCA website, “commissaries are required by law to sell items at prices set only high enough to recover item cost, with no profit or overhead factored into item price, and our pricing procedures adhere rigorously to this legislative requirement.” With no profit being made off the sale of the items, the commissary relies on the surcharge and their operating budget to keep their doors open.

Even if privatization does not take place, other changes to the commissary system could be implemented in the future to help the commissary survive with less money needed directly from DoD.  One change could be allowing the commissary increase the prices of the products above cost so a profit is made, while still maintaining an average overall savings against local retailers. This change to the pricing policy could lessen the amount of money that the commissary system needs from DoD to operate.  Believe it or not, the National Defense Authorization Act for Fiscal Year 2016 covers this with the following language “The Secretary of Defense shall establish the sales price of merchandise sold in, at, or by commissary stores in amounts sufficient to finance operating expenses”.

Read the  H.R.1735 – National Defense Authorization Act for Fiscal Year 2016

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