The government is constantly looking at ways to save money and each year the commissary budget comes into question. How can they cut the $1.4 billion commissary budget? Over the years many ideas have been presented, from privatizing the commissary to creating a private brand or even using variable pricing.
It has mostly just been a lot of talk.
The government has finally decided to do something more progressive and hired an outside firm to study ways to save money. These cost-cutting studies will cost the commissary nearly $4 million.
The Defense Authorization Act gave the DoD the responsibility of determining how to save the government money by cutting the commissary budget. The Department of Defense contracted Boston Consulting Group to conduct 2 studies in order to determine exactly how to cut the Defense Commissary Agency (DECA) budget. These two studies cost nearly $4 million and yes, that came out of the commissary budget.
The first study, which started in January 2015, has already been complete and cost $2.3 million. Its purpose was to determine any cost-cutting possibilities. Another contract, this time for $1.44 million, was also awarded to Boston Consulting Group and is already in progress. The goal of this study is to develop a way to compare civilian grocery prices with commissary prices to determine a baseline savings.
The Defense Commissary Agency says that customers save on average 30 percent compared to civilian grocery stores based on their own research. The government doesn’t want to just take their word for it however. Boston Consulting Group is now creating a methodology to determine price comparisons.
Will all of this research be worth the cost? It’s hard for the average consumer to see the justification in spending nearly $4 million of the commissary budget on researching how to save money.
The saying “you have to spend money to save money” comes to mind, but that’s a lot of money. What will the return on investment be? What will commissary patrons get out of this?
The second study isn’t complete yest, but the results of the first study are in. The Boston Consulting Group recommended ways to save money in the commissary budget by utilizing variable pricing and creating a private label of products. They also recommended consolidating all of the military exchange systems but that idea has already been turned down.
The Defense Authorization Act gave the Department of Defense the ability to test some of these money-saving options out, such as variable pricing. Variable pricing would mean pricing products differently across the country based off the price in the market. Products in the north typically cost more than some in the south. That means families in some parts of the country will be spending more on groceries than others.
Critics of variable pricing are quick to point out that military service members receive the same base pay no matter where they are stationed, with only basic housing allowance adjusting for location.
As the law currently stands, the commissary is only allowed to sell products at cost plus 5 percent surcharge. While Defense Authorization Act gives the commissary the ability to test variable pricing in areas, the law would have to be changed to implement it permanently.
The creation of a commissary private label was recommended as another option. Those opposed to the idea say that that might actually result in an increase in cost. Civilian grocery stores that have their own private label spend a large sum of money marketing their products to consumers. You have to build up a trust. As it stands, military families trust that the commissary offers quality products at cost plus a small surcharge.
What recommendations will the government take into consideration and when might patrons see changes?
That is yet to be determined, as the second study has not been completed yet. As most things with the government, this is a long drawn-out process.