Pentagon officials have called military resale officials to Washington next week to discuss consolidation of the commissary and exchange systems — and the emphasis seems to be more on "how" rather than "if," according to numerous sources.
It is unclear just how far the consolidation idea has gone to date, but the sources said Defense Department leaders want to push forward on the concept, which was recently recommended by the Military Compensation and Retirement Modernization Commission.
One source said his understanding is that exchange officials are being called to Washington to review DoD's plans for implementing the commission's recommendations for combining exchange and commissary operations.
Virtually all those interviewed, all of whom spoke on condition of anonymity, said they believe DoD leaders have made the decision to consolidate. "Why are they having these meetings, if no decision has been made?" one source said. "In our opinion, DoD leadership has decided it will happen."
Yet another source said he is encouraged by DoD's willingness to get input from the exchanges. Defense officials are "starting from the position of, 'Let's make consolidation work, and if not, show us data about why not,' " the source said, adding that a "series of meetings" is scheduled.
Congress will have the final say in such a major restructuring of the military resale system, since changes in law will be required — and it's unclear at this point whether lawmakers will support a consolidation plan.
The White House has said that by the end of the month it will offer more details of President Obama's response to the compensation commission's 15 recommendations on various aspects of military compensation.
The DoD meetings reportedly are being convened by the office of the deputy chief management officer, who is described on the department's website as the "primary agent for improving the cross-cutting management of defense business activities."
A defense spokesman declined to confirm the meetings. "Officials from across the department and military services have, and are meeting routinely to review and analyze the Military Compensation and Retirement Modernization Commission's recommendations. We have nothing to announce at this time," said Navy Lt. Cmdr. Nate Christensen.
Neither the Defense Commissary Agency nor the military exchange services would confirm the meetings, either.
The annual commissary budget of $1.3 billion has been under increasing scrutiny from defense officials, who have proposed cutting that budget in each of their last two annual budget requests. They've also asked for legislative changes that would allow them to mark up prices of some items, rather than sell everything at cost.
The profits would pay for some of the operating costs of commissaries. Budget documents for fiscal 2016 state DoD would save a cumulative $4.4 billion from fiscal years 2016 to 2020 under those proposals.
In January, the compensation commission recommended consolidating the commissary and exchange organizations into a single Defense Resale Activity, combining many of the back-end office and support functions such as logistics and staffing.
The new consolidated organization would be responsible for the operations of the exchanges and commissaries, but initially, individual branding would be retained for the Navy Exchange Service Command, Marine Corps Exchange, Army and Air Force Exchange Service and the Defense Commissary Agency.
Some or all commissary staff could be converted from taxpayer-funded federal employees to workers paid from nonappropriated funds, the commission stated in its report.
Commissaries would be allowed to sell some convenience items like beer and wine, under the proposal, but commissary prices on convenience items would increase. Food and other essential items would continue to be sold at cost.
Raising the prices of some items, and consolidating the organizations, could gradually start saving taxpayer dollars by 2017, and by 2053 could save more than $1 billion a year in inflation-adjusted dollars, the commission calculated.
Skeptics are concerned about the effects of raising prices at commissaries, which could drive away customers and start a downward spiral for the military resale system and affect on-base morale, welfare and recreation programs, which depend heavily on contributions from exchange service profits.
In making their recommendations to shore up the military resale system and rely less on taxpayer funding, the commission cited previous consolidation studies. But skeptics note that the most recent study was done 10 years ago.
The compensation commission "offered a proposal, but not a plan," one source said. "It doesn't outline the risks associated with consolidation."
He noted that in the civilian world, many mergers don't achieve the desired results. And in this case, he added that it would be unprecedented to merge three department store systems with a grocery chain.
"There's no model in the world we can find for DoD to follow," he said.
Sources indicated there has been a high level of friction between DoD and the services regarding the consolidation issue, although one said he is encouraged that the military exchange leaders are now being fully included now in the discussion.
"Previously, exchange leaders were excluded from the conversation. [Personnel and readiness] officials were moving aggressively to consolidate, and there was pushback from the services. It has been elevated out of [personnel and readiness] and to the deputy chief management officer," he said.
Three other sources said their opinion is that DoD leaders already have decided that consolidation will happen. One said next week's meetings have been framed as: "If the decision is made to consolidate, how would we do it?"
The meetings are a combination of looking at the commission's recommendations relating to consolidating commissaries and exchanges, while at the same time formulating a plan to consolidate them, one source said.
"When the [compensation commission] brought the recommendation forward to consolidate, it gave it legitimacy," he said.
The commissary system "delivers good benefit for the value," concluded a recent report by the nonprofit Business Executives for National Security, which evaluated several reform options for the commissary, including consolidation. That report echoed concerns of others that DoD needs to base any changes to the commissary system on "metrics and valid business cases."
The report recommends that policymakers collect more information before making changes. "Specifically, BENS recommends an evaluation of the commissary benefit's return on investment and value to service members." BENS also recommended at least one other reform alternative — the "smart consolidation" of the supply chains that support the commissaries and exchanges.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
