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GFS CoverGovernment Food Service


July 2014
Consolidation at the Expense of DFACs

A budget-conscious military is ramping up efforts to concentrate subsistence purchases, reducing the number of vendors selected for each specific category, to achieve savings by leveraging buying power to get better prices.

Defense Logistics Agency (DLA) Troop Support has three categories in the works and more to follow. The Joint Services Prime Vendor Program (JSPVP) is in the third wave of a similar program on the Morale, Welfare and Recreation side.

The conundrum is how to balance expected savings in subsistence procurement costs against maintaining sufficient variety in the catalog of items available and improving warfighter support.

DLA is reviewing subsistence purchases as part of its “13-in-six” strategy that aims to achieve $13 billion in annual cost savings in the next six years. Plans to consolidate procurement outside the continental United States (OCONUS) in nine categories, amounting to $626 million in fiscal 2013 (63 percent of total OCONUS subsistence spending) are expected to yield savings of from 10 percent to 20 percent.

Expanding the strategy to CONUS is also under consideration.

Already, consolidation reduced the OCONUS chicken category to two contracts (one restricted, the other a small-business set-aside) from 26 supplier agreements, resulting in stock number items falling to 30 from 154. Beef would be consolidated into three contracts (one unrestricted, two set aside for small businesses) from 31 supplier agreements, with stock numbers cut to 66 from 208. Turkey gets two contracts, down from 25 agreements, with stock numbers reduced to 57 from 149.

One of the challenges, particularly if consolidation spreads to CONUS purchasing, is how to refresh the military menu and make the options available in dining facilities more appealing to this generation of service members so that they stay on meal cards instead of spending subsistence allowances, or their own money, to eat somewhere else.

Another is that dining facilities are becoming less accessible. Budget cuts have reduced operating hours at some DFACs and are causing others to close; that invites service members to turn to alternatives on or off the base.

One unintended consequence is that opportunities DFACs offer to educate about nutrition and encourage healthy eating are lost.

Small businesses are concerned about being shut out by plans to consolidate food purchasing, which further strains availability and variety.

Concentrating sales into fewer suppliers may reach the desired cost savings, but at the risk of variety and at a time when the military menu is changing.

In setting out to reduce subsistence expenses, DLA (and JSPVP on the non-appropriated fund side) instead may be following a path that leads to dining facilities with fewer choices, limited menus, diminished customer satisfaction and lower utilization.

Final calculations predicting the cost savings from consolidation in subsistence procurement do not present a true picture unless they factor in hidden costs paid in unrealized dining facility potential and possible reduced warfighter support.