Defense officials are a step closer to merging the three military exchange systems and the commissary system into one “defense resale enterprise.”
In a memo signed March 1, Lisa Hershman, acting DoD chief management officer, approved the business case for the merger.
The merger will require the approval of Congress and nothing is yet final. Current law requires the Defense Department to operate separate commissary and exchange systems, so that law would have to be repealed. Another law prohibits DoD from using any taxpayer dollars to implement consolidation of resale entities until Oct. 1, as lawmakers evaluate the proposal.
In the meantime, a task force will continue with planning efforts for a consolidated organization, stated Hershman, who is in the position that ranks third in the DoD hierarchy. The consolidation of the commissary and exchange systems also must be approved by acting deputy secretary of defense David Norquist. A source said he is expected to approve the proposal within days; a report and legislative proposals will then be sent to Congress.
Officials have said that the first step would be to merge the exchange systems — Army and Air Force Exchange Service (AAFES), Navy Exchange Service Command and Marine Corps Exchange. It’s not clear whether officials have the authority to do that without legislation, but regardless, they can’t spend taxpayer dollars on any consolidation implementation before Oct. 1.
The draft report from the task force, which analyzed the business case for consolidation, said its analysis supports merging the above-store functions of the exchange systems entirely, along with the above-store functions of the Defense Commissary Agency, into a single organization, while keeping specific grocery functions separate.
Hershman’s memo stated she will recommend that the Marine Corps Morale, Welfare and Recreation and Warfighter and Family Services operations under the umbrella of Marine Corps Community Services, or MCCS, also be included in the consolidation because of their operational model, which includes the Marine Corps Exchange.
Marine Corps officials have previously pushed back against proposals to put MCCS under the control of the proposed new defense agency, citing these efforts are “viewed as an intrusion to Title X authorities.” The MCCS organization “provides the commandant of the Marine Corps an integrated system of community services to help care [for], equip, and train our warfighters,” officials said in a previous position paper.
The costs of implementing the consolidation is estimated to be $457 million to $570 million over five years, according to the business case analysis from the defense task force, completed in November. The task force stated DoD could “harvest significant savings” by consolidating commissary and exchange systems into one entity, and contends the benefits would “far exceed the costs.”
Hershman stated she will also recommend that the deputy secretary authorize a new defense agency or expand the mission of an existing DoD component to assume jurisdiction over the defense resale enterprise. She’ll recommend that the new agency be placed under the authority of the Under Secretary of Defense for Personnel and Readiness.
The task force report indicated that regardless of consolidation, the Defense Commissary Agency needs a full-time director, so that hiring process will begin, Hershman stated.
While day-to-day operations of the separate resale organizations will continue, resale leaders must go to the task force director for approval before taking any actions that “could be inconsistent with or hamper consolidation,” Hershman wrote.
“The department’s intent is to improve community services for our service members and their families, improve support to commanders, and fulfill its fiduciary responsibility” concerning taxpayer and nonappropriated, or MWR, funds, Hershman wrote.