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The Pentagon won’t merge commissars and exchanges, just yet

The Department of Defense frustrated plans to merge the Department of Defense quartermaster system with the three separate military branch exchange services.

In an April 4 memo to Pentagon leaders, Undersecretary of Defense Kathleen Hicks directed officials to “cease all efforts to shore up Defense Resale Entities.”

According to Hicks, reviews of the proposal have shown that cost savings and efficiency improvements can be achieved in other ways that do not jeopardize the stores’ contributions to the military community.

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“Alternative approaches can realize the benefits of consolidation without the risks that consolidation would bring to the mission,” Hicks wrote.

A DoD report released in 2019 and endorsed by Pentagon leaders at the time recommended merging the Defense Commissary Agency with the Army and Air Force Exchange Service, Navy Exchanges and Marine Exchanges into a single entity, saying consolidation could save between $700 and $1.3 million. billion in the first five years and $400-700 million per year thereafter.

According to the report, the savings would have resulted from the elimination of duplication resulting from the management of three separate exchange systems and from the commissioners, who maintain their own management and administrative support systems.

A 2020 analysis by the Government Accountability Office criticized the DoD estimates, saying that several underlying assumptions behind the savings were incorrect, having overestimated the number of identical products sold in the four systems and underestimated the cost of creating new ones. a new headquarters and building. a system-wide information technology system.

“Until the task force reevaluates and updates, if necessary, its savings and cost estimates, the DOD and Congress will not have reliable information to consider resale consolidation,” notes the GAO report.

Although the DoD was unable to consolidate the systems without congressional approval, it continued its efforts to prepare for the consolidation, a move that would have combined the commissioners, who sell subsidized groceries and discounted prices to buyers, plus an additional 5% to maintain stores and equipment, and exchanges, which sell household goods at a profit, funding morale, welfare and recreation programs such as fitness centers, daycares, recreation and other quality of life programs.

Critics of the proposed merger, including many military advocacy groups, have raised concerns that the plan would harm facilities and activities of service members and their families that are not funded by Congress if the Commissariat system drained the profits of the exchanges.

In 2020, the commissariat system cost the Department of Defense nearly $1 billion, down more than $300 million from 2017.

To continue to find efficiencies and efficiencies, Hicks directed the Under Secretary of Defense for Personnel and Readiness to “focus future efforts on facilitating collaboration” between the four systems.

Hicks said they must report at least twice a year to the Defense Resale Executive Board on their cooperative efforts and also keep the Deputy Assistant Secretary of Defense for Military Community and Family Policy informed of Their efforts.

Defense Commissary Agency Director Bill Moore welcomed the decision, saying he was satisfied in a statement on Tuesday. “We … know that it was based on the valid facts and assumptions presented in the [fiscal 2021] business case update mandated by Congress,” Moore said.

— Patricia Kime can be reached at [email protected] Follow her on Twitter @patriciakime.

This story has been updated with a statement from the Defense Commissioner’s Agency.

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