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Editorial Comment — December 2016

What Next? …

Part of our job is to ask questions. Besides those things we’d like to find out ourselves, other inquiring minds keep asking us questions of their own. And in the alternative universe that is the world of government contracting, there’s a lot to wonder about.

For instance: once the Defense Commissary Agency agrees to a pricing schedule, can it at a later date demand after-the-fact price reductions or rebates?

Like too many of the questions we have, there’s not an easy answer to that.

Resale Ordering Agreements, or ROAs, issued by the Defense Commissary Agency require that suppliers offer the agency prices as low as or lower than those offered to U.S. supermarkets “under similar terms and conditions.”

We have heard that recently, at the urging and direction of Boston Consulting Group, DeCA buyers have been suggesting in one-on-one meetings that suppliers rebate portions of payments made for orders placed under ROAs for commissary resale items, claiming that the prices offered on those orders were not as low as the supermarket prices.

We’re not lawyers, but we have been advised that the ROA is not in itself a contract; that instead, each order placed against an ROA for which delivery is made and payment received constitutes a separate completed contract. And because of that completed contract status, any allegation that the prices offered did not meet the ROA requirement constitutes an allegation of contract fraud.

A supplier who agrees to write a check or offer discounts is in effect admitting contract fraud, a criminal offense in the jurisdiction of the Defense Criminal Investigative Service.

However, provisions of the Federal Acquisition Regulation permit DeCA to choose instead to handle the matter as a “dispute” over pricing; but that course of action requires a demand in writing laying out the facts that support a claim of overcharging; the supplier has the right to a judicial hearing before a contract appeals board; and the burden of proof lies with DeCA.

Procedures to be followed are spelled out in FAR and its related guidelines, and as long as the guidelines are met, all parties to the contract(s) should end up in agreement.

But in any case, it seems to us that the “conditions” part of the ROA phrase is being overlooked. No supermarket in the country matches the conditions DeCA presents and its suppliers face.

And this is only one aspect of the DeCA transformation process to ponder. Here are some others:

• Will the surcharge be eliminated now that DeCA is going with private label and variable pricing programs to make more money?

• Is DeCA basing its stock assortment decisions on which products will generate the highest margins as opposed to patron demand?

• Is it true that DeCA has under-executed its appropriation in the past five years by as much as $160 million? If so, why? Such an amount could perhaps have helped to fill many of the empty commissary store shelves that keep showing up on social media.

• Does DeCA plan to keep a substantial number of value brands, which by and large have enjoyed strong sales and customer acceptance, on the shelves?

• With a single distributor supplying DeCA’s private brands, how will other distributors react? What about manufacturers competing with those private brands — how will they react? Are there conflicts of interest?

• Who will pay for stocking private-label shelves? Surely no one is expecting brokers or other manufacturers to pay. Will taxpayers foot the bill … or will it be the patrons?

• When will DoD produce the data GAO has suggested it needs before proceeding with DeCA’s transformation? Cost estimates, assumptions, trade-offs, limitations, methodology, time frames … all missing. The Pentagon concludes that “budget neutrality” for the commissary system is not possible, but leaves out all the details … and GAO knows as well as anybody that that is where the devil is.

• Will DoD then meet GAO’s bar of “generally accepted research standards” … as its first report, GAO said, mostly did not?

• When will the market basket savings benchmarks be released? Everyone knows they won’t come up to DeCA’s much-publicized 30 percent … and it’s our understanding that the data has been gathered … so what’s the holdup? Are they being re-calculated — er, we mean, checked for accuracy?

• Will Congressional staffers read the report on savings and satisfaction benchmarks if and when it finally does appear? And if it does appear, will any decision makers even look at it?

• Is DeCA actually testing the first group of private label items chosen, to see if they are accepted by the patrons before ordering additional private-label products? What if the commissary third-party private-label program doesn’t work? Will it take a full five years to find out?

• How long will it take for DeCA to admit and correct any mistakes in deleting brand-name products to make room for private-label items? Will the customers still be there if and when they do?

• Does third-party private-label supply inch the system a step closer to privatization?

• What will the upcoming report on privatization reveal?

• Has privatization been someone’s “Plan B” all along? Maybe even “Plan A”?

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