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EDITORIAL COMMENT: The Serving Line


May 2013
The Old Chicken and Price Question

Anyone fighting to balance family finances in an austere economy by shopping for bargains at grocery stores to cut down on costs can understand the dilemma facing the Defense Logistics Agency.

The agency is striving to save $10.3 billion in the next five years, partly by revising its procurement strategies to trim operating and material costs.

For its part, DLA Troop Support is contributing to the goal with a five-year plan that achieves a 10 percent reduction in costs associated with annual subsistence sales by fiscal 2018 to be reached in increments of 2 percent annually beginning with the current fiscal year.

To bring its household costs down, DLA Troop Support settled on a strategy that attempts to achieve better prices by leveraging its regular purchasing volume for outside the continental United States (OCONUS) into fewer suppliers selected through a competitive process.

Currently, OCONUS purchases made through prime vendors are spread out across at least 26 suppliers contracted with Troop Support last year and bought at the price available for the quantity needed at the time.

Troop Support maintains that the process of it selecting two suppliers for chicken is more competitive compared with the current system in which OCONUS prime vendors choose to source items from among the 26 companies stocking the chicken catalog.

It is easy to recognize the fiscal challenges pressuring DLA Troop Support to trim the costs associated with annual subsistence sales; whether the solicitations for chicken and other center-of-the-plate categories achieve the goal of lowering costs remains a puzzling question.

Adding to the riddle is that Troop Support is taking the step of consolidating OCONUS chicken purchasing before implementing the Manufacturer Pricing Agreement (MPA) and evaluating its contribution to lowering costs associated with subsistence sales.

The MPA program was established in 2009 to realize new pricing criteria for DLA Troop Support's OCONUS Subsistence Prime Vendor program. No specific timetable was given for when Troop Support would enforce the program, but progress is being made in growing the list of prime vendors participating.

An austere economy demands shopping for bargains. With the chicken center-of- the-plate category solicitation, however, DLA Troop Support risks putting all its OCONUS eggs in one basket.

Prices under contracts with the two suppliers selected are subject to quarterly adjustments made in accordance with the Producer Price Index for processed chicken. The government may also opt to negotiate prices on all orders in the competitive range via an online reverse auction.

Whether DLA Troop Support succeeds in making the desired cuts to subsistence operating and material costs seems like the old chicken-and-egg conundrum: What lowers prices first, consolidating purchases into a high-volume acquisition made with a few competitively selected suppliers whose cost is adjusted quarterly to an index or when the prime vendor has a choice of companies vying for the buy.