EDITORIAL COMMENT: The Serving Line
The Price of Partnership
For some time, Defense Logistics Agency (DLA) Troop Support has been talking about revising its procurement strategies to cut costs associated with annual subsistence sales and asking vendor partners for greater cooperation in achieving that goal.
Vendors were nonetheless surprised by the latest in a series of belt-tightening steps being taken by the agency. Early this year, companies participating in the National Allowance Pricing Agreement (NAPA) program received letters from DLA Troop Support seeking more “robust” discounts on purchases, asking that they be increased to a level commensurate with that of commercial customers with similar sales volumes.
In fiscal 2013, the NAPA program comprised 244 vendors with 12,344 active items. During that period, DLA Troop Support received $10.4 million in allowances, or 3.5 percent, on purchases it made of $296.2 million.
In the sometimes complicated math of determining selling prices, calculating the savings on purchases made may not give an accurate picture of how great a discount DLA receives.
DLA is concentrating on the dollars it saves through allowances on purchases made through the NAPA program, but the true discount may be larger because the participating vendors likely extended very favorable terms at the outset.
The NAPA letter is related to DLA headquarters' “13-in-six” strategy, which aims to achieve $13 billion in cost savings over the next six years on purchases of $39 billion annually — roughly a 5.5 percent cost reduction, most of it expected to be achieved in the price of materiel.
The strategy is a responsible reaction to federal fiscal belt-tightening. It continues movement toward a leaner supply chain that began in earnest in 2012, when DLA started using reverse auctions to reduce costs on acquisitions of at least $100,000 and progressed with plans to consolidate purchasing into fewer suppliers in categories such as beef and chicken outside the continental United States (OCONUS).
Trimming the supply chain can be traced back further to August 2011, when DLA last held its Subsistence Worldwide Customer Conference and Food Show in Anaheim, Calif. The Army's Deputy Chief of Staff, G-4, Lt. Gen. Raymond Mason, a former commander of DLA Troop Support and a major general at the time of the conference, discussed the importance of streamlining contracts and menus over the next few years in order to align the military's budgets with future Department of Defense spending projections.
Under pressure from ever-tighter federal budgets, DLA Troop Support is becoming more aggressive in revising its procurement strategies and reviewing the price it pays to purchase subsistence supplies.
How much advantage the agency gains by managing to negotiate any increase in discounts already received from NAPA participants, however, remains to be seen.
The program was created in 1996 as a way to bring national brands, and manufacturer branded concepts where appropriate, into military dining facilities.
It was to be a true collaborative effort between national brand suppliers and the Defense Personnel Support Center (DPSC), a DLA Troop Support predecessor. The goal was to make the DFAC a destination.
It may be time, as DLA Troop Support reviews the NAPA discounts it receives, to review the initial concept as well and work as robustly to develop the true partnership originally envisioned.