As defense officials place more emphasis on healthy lifestyles in the military community, some say prices of fresh fruits and vegetables for commissaries in the Far East will increase soon and could impede good eating habits for troops and families.
Two Defense Commissary Agency contracts scheduled to take effect Oct. 1 will change the way the agency procures fresh fruits and vegetables for its Pacific stores. The contracts are being protested by the previous contractor. The Government Accountability Office is expected to rule soon; if the decision goes in favor of DeCA, the new contracts will go forward.
One source familiar with produce procurement said the commissary agency's efforts reportedly are aimed at addressing issues with poor quality of produce in the Pacific. At the same time, DeCA also is under pressure to reduce the taxpayer cost of operating commissaries, currently about $1.4 billion a year.
The government pays $48 million a year to ship $25 million worth of produce to 29 commissaries in Japan, South Korea and Guam. These overseas transportation costs are paid so that those military customers have access to groceries of comparable cost, type and quality as commissary patrons in the U.S.
Under the new contracts, the government would not pay that $48 million. The contractors either would get the produce from local sources in those areas, or bear the cost of shipping it from other countries, including the U.S. That cost would be borne by commissary customers. According to an industry source, that same $25 million of produce bought in the local area would cost customers $60 million to $100 million.
Either way, prices will rise for customers, industry sources say. "Ironically, shipping for doughnuts and Twinkies will still be paid for by those funds, just not produce. Why not kick junk food off instead of produce? There would be less incentive to buy junk food," said one source.
As part of DoD's recent Healthy Base Initiative, officials looked at sales of produce in commissaries at the participating installations. One of those is in DeCA's Pacific region — Yokota Air Base, Japan.
DeCA did not provide data on the percentage of sales of produce at Yokota at the beginning of the Healthy Base Initiative project, compared to the percentage at the end. Asked how the new contracts for produce in the Pacific tie into the efforts to increase healthy habits such as eating more fresh produce, DeCA spokesman Kevin Robinson said: "Although the consumption of fruits and vegetables has been noted as an important part of a healthy diet, the contract for supplying our Pacific stores with fresh produce is not connected with [the Healthy Base Initiative]."
Issues also are in play related to inconsistent quality of produce in the local markets in Japan and South Korea, according to an analysis by Ernst & Young, paid for by the current produce contractor for the Pacific, Raymond Express International, which is protesting the new contract.
Ernst & Young's analysis, conducted in 2014 during the peak season of local produce availability, found that complete reliance on local fresh fruits and vegetables in the Far East region "will result in increased prices, lower availability, and inconsistent produce quality throughout the year."
Local prices are even higher during other seasons; in winter, they are twice as high, according to the analysis.
"Right now, troops in the Far East Region have a similar experience at the commissary as they do at home in the United States. Under the new proposal, this will not be the case," the Ernst & Young analysis concluded.
DeCA contends that its new business model, encouraging produce contractors to use as much local produce as possible, has been used successfully in Europe since 2007. However, more locally grown produce is available in Europe than in the Pacific, sources said.
Asked how the new contracts will affect pricing of fresh fruits and vegetables, DeCA's Robinson said prices "will be comparable to current commissary prices without the taxpayer incurring the $48 million transportation costs currently paid by the government."
"While we estimate that some prices may increase or decrease, our comparison of overall patron savings for a sample of items to be provided under the new contract show those prices to be comparable to current savings."
He said that the new contracts provide for savings similar to percentages in Europe. Those are in the range of 25 percent to 27 percent.
But again, those savings are based on the markets in Europe, where local produce is more abundant. That savings percentage when compared to local markets in the Pacific will result in higher prices in the Pacific, according to industry sources.
Average savings on commissary produce in the Pacific is about 40 percent compared to commercial stores in California, the current benchmark, according to a source familiar with the Asian produce market.
DeCA's new benchmarks for savings will be comparisons with the local foreign markets, where average prices are 66 percent higher than those available in Pacific commissaries today, according to Ernst & Young. That cost differential increases outside of the local growing season.
If produce must be shipped in by air or by sea, the price increases would be substantial, according to Ernst & Young, because that cost would have to be factored into the price of produce.
"There are no American cherries or corn from Iowa available [in the Pacific]. Customers will pay a higher price," an industry source said.
"We should not ask military families to choose between making nutritious meals for their children and saving for their future college expenses," wrote Rep. Duncan Hunter, R-Calif., in an editorial in Military Times.
The House has adopted a Hunter amendment to the 2016 defense authorization bill that would prevent DeCA from making its planned changes until further study can be done.
House and Senate lawmakers are negotiating a final version of the bill.