Consolidation of Military Retailers Won’t Be Necessary, DOD Official Says

Defense officials believe that consolidating the military’s commissary and exchange systems will not be necessary to find sufficient savings that would allow the federal government to slash its support for the military’s resale operations.

“We believe we can get efficiencies without consolidation,” Peter Levine, DOD’s deputy chief management officer, said during the annual convention of the American Logistics Association.

The department had proposed reducing the $1.4 billion annual federal subsidy for military grocery stores by $1 billion in response to budget constraints. But lawmakers are concerned that budget-driven spending cuts would undermine the benefit for military families, reported Military Times.

DOD now will “look for efficiencies first and let efficiencies drive the budget, rather than the other way around,” according to Levine.

A newly formed Defense Retail Business Optimization Board will consider cost-cutting ideas, such as common business practices for acquisition and distribution. One change that could increase revenue for commissaries would be for Congress to permit the Defense Commissary Agency to adopt a more flexible pricing system. Now stores are required to sell items at the cost the agency paid to the manufacturer or distributor, along with a 5 percent surcharge that goes toward capital costs.

The Pentagon would be required to craft a comprehensive plan for operating its commissary and exchange systems without taxpayer support that preserves the customer benefit, under the fiscal 2016 defense authorization bill.

The department can only cut $300 million — or 21 percent — out of the commissary budget by the end of FY 2018, the deadline included in the legislation, according to Levine.

“The only way to get $1.1 billion in additional savings is by reducing savings, closing stores or both,” he said. “My message is that we can’t take that drastic step and expect to maintain the benefit.”

Dan Cohen
Dan Cohen
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