Remember that Department of Defense report that said budget neutrality isn’t a vital option for commissaries?
Well that report isn’t the end of this discussion.
More likely that report is just the beginning of an ongoing discussion about the feasibility of self-sufficient commissaries.
The Government Accountability Office (GAO) recently released a report titled “Plan and Additional Information Needed on Cost Savings and Metrics for DoD Efforts to Achieve Budget Neutrality.” In this report GAO evaluated the DoD’s report and found that it lacked specific data to support its stance that budget neutrality isn’t feasible for commissaries.
“GAO’s analysis found that DoD’s report fully addresses three of the seven mandated elements and partially addresses the remaining four. Although DOD’s report discusses the seven mandated elements, GAO found that including additional information would have made the report more consistent with relevant generally accepted research standards and would have made the report more useful to decision makers,” the GAO report stated.
More useful to decision makers? Wait…what?
Let’s take a step back into the recent history of reports on cost-saving measures for the commissaries.
As commissary shoppers, we know that that DeCA operates the commissaries. Prices at the commissaries are product cost plus a 5 percent surcharge. In fiscal year 2015, DeCA’s annual sales for its commissaries were approximately $5.5 billion. DeCA received $1.3 billion in appropriated funds in fiscal year 2015 to operate the commissaries.
Those appropriated funds are currently under the microscope of the defense department.
The National Defense Authorization Act for Fiscal Year 2016 “mandated DoD to provide a comprehensive plan to achieve ‘budget neutrality,’ which DoD interpreted as ending the use of appropriated funding for commissaries and the military exchange system, by October 1, 2018,” as explained in the recent GAO report.
This mandate has caused a lot of head scratching and number crunching for those at both DoD and DeCA.
The Boston Consulting Group was contracted to conduct 2 separate studies that may lead to cost-saving measures. In February, DoD established the Defense Resale Business Optimization Board. This board is working to help implement reforms within and among the commissary and exchange systems.
Then DoD released its report saying budget neutrality will be difficult, if not, impossible. GAO then reviewed that DoD report as it was directed to in last year’s defense budget. That’s what lead to this report and GAO’s recommendation that “DoD provide information to Congress to support its conclusion about budget neutrality; develop a plan for achieving alternative reductions to appropriations; and identify specific metrics for customer satisfaction, product quality, and savings.”
“DoD did not provide a plan to achieve budget neutrality by October 2018 as mandated because according to the report, DoD cannot achieve budget neutrality without reducing savings to patrons or other benefits provided by commissaries and exchanges.”
“For example, the report stated that drastic changes, such as store closures and price increases, would have to be implemented if DOD were required to achieve budget neutrality. However, DOD did not provide additional information about potential steps to reach budget neutrality, such as cost estimates and assumptions, or include specific details about trade-offs, constraints and limitations to achieving budget neutrality such as reductions in benefits,” the GAO report said.
“Instead of providing a plan, DOD estimated a $2 billion reduction over a 5-year period, which would fall short of achieving budget neutrality by about $5 billion. DOD officials told us the cost savings amount was an arbitrary estimate, and that therefore DOD did not develop details on steps it would take to achieve the $2 billion in savings. DOD officials could not explain the assumptions, methodology, data, specific time frames or DOD efforts that would lead to the $2 billion in savings.”
In case you’re wondering why DoD didn’t conduct these types of detailed analysis in its initial report, DoD experts, who were interviewed by GAO investigators for this report, pointed to time constraints as their reason for the lack of specifics.
“According to DoD officials, for some efforts that are already being considered, DoD officials told us that they did not include some information in the report to support their conclusions because they have not had time to verify the information,” the GAO report said.
Here’s another important nugget of information: DoD concurs with GAO’s recommendations.
Now that we know that the decision makers aka Congress lack the information needed to make decisions about changes to the commissaries, what’s the next step?
I have a strong sense we’ll be reading another federal report in the near future.