Defense officials will make changes to the commissary system, but any change must meet two criteria: it must sustain the commissary benefit, and it must save money, said the official leading efforts to find taxpayer savings in the department's resale operations.
"If it isn't going to make it better, or at least keep it as good, and cost less, then I'm pretty certain I don't need to consider doing it," said David Tillotson III, DoD's assistant deputy chief management officer. Tillotson spoke at a meeting of the American Logistics Association on June 15, an industry group of manufacturers and distributors who sell products in commissaries, exchanges and MWR facilities. Officials are relying on "business case analyses" in evaluating the changes.
"Here's the bottom line. The department is committed to sustaining that benefit. There is no question about that. I've talked to the deputy secretary of defense. I have no latitude to negotiate any other position. It's that straightforward," he said.
For the record, he said, DoD officials were "thrilled" that the Senate struck down the legislative provision that would have required DoD to do a privatization test, turning over the operation of five stores on large military installations to commercial entities.
He noted that DoD doesn’t view privatization as "all or nothing," that parts of the commissary operations might possibly be performed by private companies. They have A formal request for information will determine what ideas companies bring forth.
But in terms of privatizing the entire system, overseas commissaries will be the sticking point for any company, Tillotson said. "We are unequivocally certain that people are really, really going to choke on the overseas operation portion. We're certain of that because nearly every conversation I've had chokes on that point."
But change is coming, he said.
Studies over the last 20 years about the military resale system have universally said it needs to be changed, he noted. "We have universally chosen not to do much.
"The difference between then and now is, we have yet two more studies that say to change it. The difference is, we intend to change it," he said. But that doesn't mean "throw it out, shop it out, destroy it, lose track of what the mission objective is," and other things that have been attributed to DoD's current efforts, he said. Within the last two years, the Military Compensation and Retirement Modernization Commission and a DoD-sponsored Boston Consulting Group study have both recommended changes to the military resale system.
DoD has proposed some changes, including variable pricing of items — marking up the prices of some items — and introduction of commissary private labels, in order to make money in commissaries and require less taxpayer funding. Those proposals are making their way through the legislative process this year. Currently by law, commissaries sell items at cost plus a 5 percent surcharge.
Changes will be made in a measured way, he said, with control mechanisms in place to ensure that the benefit is not degraded. But officials are also working on defining what those savings are now. "There are a lot of numbers floating around about what the magnitude of the benefit is, and I can tell you one thing about all of them. They're wrong," Tillotson said. "I'm a commissary patron. I can buy many things cheaper on the commercial market in United States grocery stores than at a commissary. I can buy many things at the commissary that are cheaper than at a commercial grocery store. That's a fact," said Tillotson, a retired Air Force officer who served 26 years.
"Whether or not I choose to go to one or the other depends on how motivated I am, what the driving distance is, what my rate of annoyance is going to be about being there, and whether or not there's an extra product I want to buy at that location," he said.
But commissaries in the U.S. are the "easy part of the job," he said, noting that it's more difficult overseas. "That's where we have tried to change a few business practices and they have met with some initial not-quite-success," he said, possibly referring to customers' concerns raised about the prices and quality of fresh fruits and vegetables in the Far East, following a Defense Commissary Agency move last year to save $48 million a year by requiring contractors to pay for the shipping overseas. But he noted some "recalibrations," and said, "That's what I'd expect. Try it, see if it works, work through the consequences, and work our way back from it if it looks like it's not a sustainable proposition."
It's also not "all or nothing" when it comes to the $1.4 billion in taxpayer dollars subsidizing the commissary operations to provide the benefit, he said. "There were those in the department who wanted to take the $1.4 billion in appropriated funds that we plow into this project every year and zero it out and say let it sink or swim. That's the wrong answer," he said.
"It's also the wrong answer to say we have to keep plowing $1.4 billion in appropriated funds every year. Somewhere in between is the truth, and we'll work on it a piece at a time, and that's our intention."
His charter from the deputy secretary of defense, he said, is to find $10 billion in additional reform savings across the Defense Department over the next four to five years to pay for modernization and readiness.
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.
