Posted on: Monday, July 16, 2001
Military Update
Commissary privatization plan faces uphill fight
By Tom Philpott
Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 49, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
Defense Secretary Donald Rumsfeld has asked Congress for authority to test whether commercial grocers can run base commissaries more efficiently than the government.
He won't win that authority, however, without a fight and perhaps a miracle. Rumsfeld's plan to experiment with commissary "privatization" at a few Army and Marine Corps bases is part of a package of legislative proposals for fiscal 2002 sent to Capitol Hill in late June.
The plan quickly drew fire from key lawmakers, military groups and the American Logistics Association. ALA represents manufacturers and brokers who do business with military stores.
Rep. Roscoe Bartlett, R-Md., chairman of the House Morale, Welfare and Recreation Panel, which oversees military resale activities, told Rumsfeld at a June 28 hearing that he would oppose any effort to privatize commissaries.
Current law bars the Department of Defense from allowing commercial grocers to run base stores. The restriction, said Rumsfeld, means commissaries can't benefit from "commercial practices in food distribution and purchases."
Capitol Hill sources said defense officials would pick only a few Army and Marine Corps stores as pilot projects. The current inventory of 300 commissaries is managed by the Defense Commissary Agency, which employs 17,000 civil service workers worldwide.
Commissaries, unlike department store-style military exchanges, are not self-sufficient. The Defense Department must spend $1.1 billion a year on store operations. According to the Congressional Budget Office, military shoppers, in turn, receive about $2 billion a year in grocery discounts.
On surveys, military people rank commissaries as a top benefit. Proponents say the stores boost morale and are important retention tools, especially for service members with families.
Critics, including the Congressional Budget Office, call commissaries costly relics of an era when bases didn't have commercial grocery stores nearby. The budget office also argues that commissaries are not cost-effective when the total cost to government — federal, state and local — is considered. This "cost" includes billions of dollars in taxes not collected each year from tax-protected commissary stores and shoppers.
Rumsfeld doesn't want to kill commissaries, only to squeeze savings out of the $1.1 billion subsidy. But service associations and suppliers of products that fill commissary shelves say the prized shopping benefit would be put at risk.
Boyd W. Raines, board chairman of ALA, argued in a letter to a senior defense official that having commercial grocers run commissaries would "erode the savings" for military families.
Commercial grocers, Raines warned, would only want to run commissaries at large bases where profits are more likely.
With their annual subsidy of $1.1 billion, commissaries set store prices at cost plus a 5 percent surcharge. The surcharge money is to repair stores and build new ones.
Retail grocers, by contrast, charge at least 13 percent over cost, and the average markup is 20 percent, said one government analyst. Those kinds of figures, and deep resistance in Congress to endangering the commissary benefit, could keep this privatization idea on ice.
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