Defense officials have begun charting a new course for the future of commissaries and exchanges, laying out their plans in a fact sheet provided to some military service organizations.

But details are minimal, and military advocates are calling for the process to be fully transparent to commissary and exchange customers.

Officials established a new board, the Defense Resale Business Optimization Board, that includes the leaders of the commissary and exchange systems.

According to the DoD fact sheet, the board has begun its work. It is unclear whether the separate boards that traditionally have overseen commissary operations and exchange operations have been disbanded.

"The first order of business is to firmly define tangible and intangible benefits across the resale enterprise and establish a current baseline against which optimization results will be evaluated," states the fact sheet.

The goal is to maintain current benefits while finding more efficient ways to operate, in order to achieve "significant savings for the taxpayer."

These definitions and benchmarks are critical, said Joyce Raezer, executive director of the National Military Family Association.

"How do they define the benefit, so they can measure whether or not they're reducing it? How will they determine the tangible and intangible benefits? How will they determine the benchmarks?" she said.

"And who's speaking for the people who need the commissaries? It has to be transparent to the customer."

Defense officials did not immediately respond to a Military Times request for comment.

This fiscal year, $1.4 billion in taxpayer funds goes to the Defense Commissary Agency for operating the stores, allowing groceries to be sold at cost. A 5 percent surcharge paid by customers at the registers covers the cost of store construction and renovation.

The fact sheet is not clear as to "how much of the current system we're changing, and to what end," Raezer said.

"We think they're going to continue to look for ways to chip away at the benefit, and there's a mood in Congress to let them," she said. "We don't see the strong understanding in Congress that the benefit is the savings. That's why these benchmarks are so important."

Army Maj. James Fisher shops for a pair of shoes in the exchange store at Nellis Air Force Base, Nev., in November. Defense Department officials are examining ways to reduce the taxpayer funds that support exchanges and commissaries.

Photo Credit: Army and Air Force Exchange Servic

The DoD fact sheet refers to using "at least two pricing pilots" to test various recommendations for reducing the amount of taxpayer dollars needed to operate the commissary system.

As part of the fiscal 2016 National Defense Authorization Act, Congress gave DoD the flexibility to try such pilot programs. At the same time, lawmakers showed their support for commissaries by adding $281 million back into the system's budget — in spite of DoD's request to reduce that funding.

At the same time, the NDAA requires DoD to develop a plan to operate the military resale system without any taxpayer dollars by fiscal 2019. That plan would have to be submitted to Congress and evaluated before it is approved.

DoD "recognizes that there are significant barriers to meeting the budget neutrality challenge without reducing the patron benefit, closing commissaries, and affecting system synergies, which would likely threaten the viability of the exchanges and [morale, welfare and recreation] programs," the fact sheet noted.

Defense officials also are proposing legislative changes for fiscal 2017 that would make this temporary flexibility permanent. "These proposals, if accepted, could also lay the groundwork for converting the defense commissary system to operating within a nonappropriated fund business framework," according to the fact sheet.

Raezer said officials may be looking at a regional pricing model, as well as at the idea of a true commissary private label brand.

"We do know the savings vary depending on geographic area," she said. "Do people in higher-cost areas need more savings? Do we settle for 30 percent savings everywhere [compared to local prices], or 15 percent savings everywhere?"

As far as a private label program, DoD officials "still don't get that military families are getting name-brand goods at private label prices," Raezer said.

The military exchange stores offer a variety of products through their own private label program.

Such programs require funding and staff to develop and manage. The idea is that while these private label brands cost less for the customers than comparable national brands, stores could mark up prices on the items and use any profits toward operating costs.

But under current law, all items in commissaries must be sold at cost from the manufacturer or distributor. So it does the Defense Commissary Agency no good to offer a private label program under its current pricing system, said Peter Levine, DoD's deputy chief management officer, in an Oct. 27 speech to the American Logistics Association.

Levine also made it clear in that October speech that DoD does not believe a merger of the commissary and exchange systems is necessary in order to achieve savings out of the resale operations.

The DoD fact sheet states that the department does not intend to consolidate the commissary and exchange systems; reduce the resale benefits to meet artificial budget goals; or reduce the portion of exchange system profits that flow into other military MWR programs.

The fact sheet noted that the two top defense officials with oversight of the resale system — the undersecretary for personnel and readiness and the deputy chief management officer — "are jointly committed" both to optimizing the system and preserving "benefit levels and quality-of-life programs."

Raezer said it's critical for personnel officials to be involved in any discussions that may define — or redefine — military resale benefits.

"People with 'personnel' in their title … we like them to be advocates for personnel," she said.

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.

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