ECN CoverE&C Commissary News

Editorial Comment — August/September 2019

Reset the Clock: Resale Savings Time? …

You can’t stop the clock, and time is running out.

But it may not be too late to do your part in stemming the declining sales in commissaries.

It appears that Congress, and its investigative arm the Government Accountability Office, are all that stand between further development of a collaborative military resale agency federation on the one side and adoption of a military resale consolidation plan that many consider seriously flawed on the other.

We urge all stakeholders to support and cooperate in any way they can with GAO’s review of military resale currently gearing up following passage of the separate House of Representatives and Senate versions of the 2020 National Defense Authorization Act.

One thing that is most puzzling is why the Pentagon is in such a hurry to adopt the resale transformation proposals of a consultancy whose most recent high-profile resale project is underway in commissaries, with an often stumbling performance that might call underlying reform directives into question.

For one thing, sales estimates have been grossly inaccurate. For 2018, the Defense Commissary Agency’s budget planning documents expected commissary sales to rise to $5.1455 billion. The estimate was off by nearly half a billion dollars; sales fell to a bit over $4.699 billion.

And though the 2019 budget sales estimate was $4.759 billion, it appears at this point that the final tally will end up somewhere between $4.4 and $4.5 billion.

That’s approaching a $2-billion slide from the DeCA-record $6.1 billion tally only seven years ago.

Since DeCA began its transformation away from a sales-at-cost-plus-surcharge model, the average price for each item the agency sells has risen steadily somewhat more than the inflation rate year by year, and market basket size has steadily diminished, dropping from $61.44 then to $57.57 this month.

And by the time fiscal year 2019 ends Sept. 30, the number of items sold in the commissary each year will have dwindled by half a billion, from 2.1 billion in fiscal 2015 to 1.6 billion this year.

Though the direction the Senate gives the comptroller general for an assessment of defense resale reform is much broader, the House version of the NDAA focuses on a GAO review of the business case analysis (BCA) that makes up the follow-on Defense enterprise-wide resale transformation plan.

The basic flaw in this just-released Defense Resale Enterprise BCA is in its scope. The Community Services Task Force and its consultant contractor, BCG again, were not charged with coming up with the best or optimal method of handling the military resale mission. In a memo issued 15 months ago, Patrick Shanahan as deputy defense secretary decreed that “a single consolidated organization” was the way to go, and directed the task force to develop a BCA in support of such an organization.

As part of his rationale, in the same memo the deputy secretary had stated that “the defense resale enterprise has been studied repeatedly since 1990 with little or no implementation of recommendations for change” — overlooking the obvious fact and neglecting to mention that the most costly element of the defense resale enterprise was at that very moment deeply involved in implementing the most drastic, perhaps cataclysmic, set of changes in its 150-year-plus history.

It would seem prudent for any GAO review of military resale reform to include this ongoing set of changes in addition to the plan on the table, to uncover flaws or unintended consequences, recover opportunities for fine-tuning and discover lessons perhaps as-yet-not-learned.

Beginning at least with the adoption of the 2015 BCG “Military Resale Study … Assessment of Opportunities for the Defense Commissary Agency and evaluation of consolidation in the broader military resale system,” a thorough examination of resale reforms currently underway as well as those not yet executed is definitely in order.

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