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Editorial Comment —April 2015

Proceed with Caution …

Once again, the Pentagon has forgotten that commissaries are not a “business;” they are a BENEFIT, almost as important a part of servicemembers’ compensation as their paychecks.

At the moment, the mantra that everything should be “self-sustaining” seems to be in fashion. But providing this benefit is not about being fashionable. It’s about fulfilling a contract, delivering on a pledge to military families.

The commissary system was never intended to make a profit. If DoD tries to convert it into a for-profit business in an attempt to recoup whatever its diminishing appropriation might be — not only will that break faith with the military family, it will bring about the failure of the system.

As this issue went to press, the word on the street was that DoD had issued a mandate to military resale organizations, exchanges and commissaries, to consolidate — just get it done, period; no ifs, ands or buts; get on board or get out of the way. The hope on the street, however, was that the situation might be less draconian.

If the decision to consolidate is predicated upon recouping the system’s $1 billion or more in funding, it will be doomed from the outset; because no matter how it is prepared, presented or promoted, that billion dollars will ultimately come out of the pockets of the military families who use the system.

Up to this point many things have been overlooked — or looked beyond — in DoD’s calculus. A few critical 900-pound gorillas have not been acknowledged.

One in particular is that civilian retailers will not only come out fighting legislatively against a new top-tier multi-channel chain “competitor,” but they will also come out swinging with all their low-price promotional muscle to draw the military family away from it.

Discounts outside the gate will become so deep commissaries will not be able to compete to the extent necessary to justify keeping their doors open. Once they’re gone, the low prices will disappear, and military families will be even more hard put trying to make ends meet.

Looking into matters on the heels of the MCRMC report, the RAND Corporation studied the likely effects of raising commissary prices, and Business Executives for National Security (BENS) reported on reform of the commissary system. A congressionally mandated Boston Consulting Group (BCG) study due in September promises to review the nuts and bolts of military resale in even more exhaustive detail.

As for the commissary benefit itself, MCRMC reviewed a great deal of material on the Defense Commissary Agency (DeCA), its customers and suppliers, and also surveyed the military community. For the most part its findings were very positive, calling commissaries a highly valued benefit, one worth protecting.

At the core of that benefit, the MCRMC said, is at-cost pricing. Both the RAND study and BENS reports returned the same unequivocal verdict: “Raising overall price levels will likely not be a successful strategy to cover shortfalls in costs caused by the elimination of the annual U.S. Department of ”In short, it just won’t work.

And among the most critical gorillas, one more elusive set of data points still needs to be brought into the light and thoroughly analyzed — the true impact and cost of consolidating

By most estimates, combining IT systems alone would cost at least half a billion dollars. Other major upfront consolidation costs include non-resale procurement, logistics and other “back office” functions … not to mention the cost of lost opportunity (as merged systems overcome dysfunction,

As for staffing, DoD is looking for even more pie in the sky. While the view from 30,000 feet may be a tidy one, in which DoD puts all its resale ducks in a row on a NAF pay scale, it is fraught with serious concerns in the real world.

How could anyone expect any APF employee (making from 20 to 30 percent more than a NAF worker) to take such a deep pay cut, plus reduced medical, retirement and other benefits — let alone 14,000 of them, or even triple that number if exchange staffs are impacted — and not have the employees’ unhappiness affect everyone they come in contact with? Who would want to shop in stores with that kind of atmosphere?

Employee unions, not yet protesting loudly, have however made their opinion clear, with the AFGE calling projected savings “illusory,” and telling both the Pentagon and Capitol Hill, “The Department can certainly save money by paying DeCA employees less, providing them with inferior benefits, and making their jobs disposable, but those are false savings, particularly given that the working and middle class Americans who work for DeCA are often military spouses — which means that the Commission’s proposal would hurt the military families it ostensibly wants to protect.”

If the Pentagon orders consolidation at any cost, it is a lemming maneuver, with the precipice not far away. We hope that cool heads prevail, and current discussions on the matter are more productive than that. At their heart needs to be continuation of funding for an at-cost benefit, preservation of all the good things the exchange systems do for their respective patron demographics, and smart discussion about the types of efficiencies that can be pursued without selling out the core of the commissary benefit to a for-profit scheme, and without harming exchange returns and the support for quality of life they provide.

Consolidating exchanges and commissaries requires changes in law. Whatever legislative revisions DoD proposes need congressional approval before taking effect.

And Congress must deliberate long and hard before telling the nation’s most critically important weapons of defense, in a time of enormous world turmoil, that they have to take a drastic pay cut.

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