Note: This article was updated on May 20 to include DoD's response regarding their upcoming Request for Information related to commissary privatization.
Some senators once again are pushing to start the process of turning over commissaries to private industry, in a repeat of last year’s effort.
But like last year, Sen. Jim Inhofe, R-Okla., is pushing back, vowing to defeat the effort to privatize without first studying the impact.
The Senate Armed Services Committee has included a provision in its their version of the fiscal year 2017 defense policy bill that would require a pilot program testing privatization at no more than five commissaries on major military bases, according to a press release from Inhofe.
The provision was included, Inhofe said, despite the fact that an assessment on the effects of privatization has not yet been completed. That assessment was required in law last year, the fiscal 2016 Defense Authorization Act.
According to a source familiar with the provision, the test would be required to last at least two years and could include an online component in the areas around those commissaries, allowing customers to order groceries online.
"There are too many unknowns as to whether privatization could directly impact a military member's ability to provide for their families as well as the potential for it to affect retention," Inhofe said in a statement, after touring the commissary at Altus Air Force Base, Oklahoma, on May 13 and talking with military families and commissary employees.
"This is why in last year's NDAA, I worked to stop an ill-advised provision to begin privatization until the Defense Department conducts an assessment for the potential costs and benefits of such action. That report has not been completed, yet the Senate's [defense policy bill] includes language this year that takes another attempt at launching a pilot privatization program. I am committed to fighting this again on the Senate floor," Inhofe said.
Inhofe is also "concerned about language included that changes the funding of the commissary system and institutes a variable pricing program, which could impact the purchasing power of our military families," the release stated. The senator intends to file an amendment to address the commissary provisions when the policy bill is being considered by the full Senate, according to the release.
In the fiscal 2017 version of the defense policy bill, senators also reportedly introduced sweeping changes to commissary pricing, similar to what the House proposed in its version of the bill in April.
That means raising prices. Commissaries would be allowed to increase their profit margin so officials can in order to reduce the amount of taxpayer dollars used to operate stores. Currently commissaries sell groceries "at cost," with no profit. A 5 percent surcharge is used to pay for construction and renovation of stores.
Meanwhile, in its research on privatization of commissaries as required by Congress, Defense officials are reportedly preparing to issue a request for information from companies about their interest in and ability to take over the operation of all or part of the commissary system. "Based on the initial interest expressed by commercial entities, the Department is now issuing this RFI," according to a draft document obtained by Military Times.
A Defense Department spokesman confirmed that the request for information will be issued soon.
"This is a Request for Information only. It is important to emphasize that NO decision has been made to privatize commissaries and the Department is NOT soliciting actual proposals for privatization," said DoD spokesman Air Force Maj. Ben Sakrisson, in an email response. "The Department is committed to preserving the benefit for our valued commissary customers and is exploring all potential options for doing so that might reduce the cost to the government of delivering that benefit."
Confirmation of the upcoming RFI was not immediately available from defense officials. A timeline is not available.
According to the draft document, the information received "will assist in developing a plan to privatize all or portions of" the Defense Commissary Agency. The draft notes that DoD is currently exploring ways to reduce the amount of taxpayer funding required to operate commissaries around the world. This year, that amount is $1.4 billion.
Companies who that provide information about their ability to take over some or all operations should consider, according to the draft, that a goal in any privatization of the system is to maintain customer savings at a level consistent with an approved baseline. DoD officials are in the process of developing a new baseline for savings. Currently, the Defense Commissary Agency’s calculation is that savings are an average of 30 percent lower than commercial prices.
Advocates have expressed concern about DoD's new methodology for calculating a baseline if it's limited in scope, compared to the commissary agency's method of pricing thousands of items compared to other grocery stores, regionally.
DoD wants interested companies to answer whether their business could fully perform all the functions of the commissary agency, or if they would need to partner with other businesses. In addition, it asks they ask whether the company could perform the functions without any subsidy from the government and still maintain the customer savings as well as the quality of products and service, plus They ask a number of questions related to specific aspects of the commissary agency’s operations.
In its description of the commissary agency's scope of operations, DoD notes: "Because military families reside in countries around the world and in many remote and isolated locations, more than half of DeCA's stores operate in those environments but account for only 20 percent of sales."
Larger stateside stores support the smaller remote and overseas stores, according to the American Logistics Association, whose members are the manufacturers and distributors who sell products to commissaries. They noted that more than two-thirds of commissaries operate in areas where it would not be profitable for commercial entities.
ALA has stated its members agree with outsourcing where it makes sense, but not outright privatization. The association notes that major commissary functions already are outsourced: distribution, and several in-store functions such as bakeries and delis, and shelf stocking, produce distribution and a number of other functions.
Karen Jowers covers military families, quality of life and consumer issues for Military Times. She can be reached at kjowers@militarytimes.com.
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.
