Protection of critical military benefit shows bipartisanship can work
The recent decision by the Department of Defense (DOD) not to consolidate the military’s commissary system with the services’ retail operations is gratifying for two primary reasons. First and foremost, consolidation would have degraded an earned element for service members past and present and their families, weakening an essential component of military compensation and breaking a promise to those who serve and have served.
Second, the decision not to consolidate demonstrates our system of checks and balances can work. Both Congress and the General Accountability Office (GAO) stepped in to review the initial DOD business case analysis and said the consolidation was simply far more costly than originally expected.
Some background: The military’s commissary system offers subsidized groceries to active duty and retired military personnel, and military exchanges serve as department stores. Commissaries are funded with appropriated funds and exchanges are self-supporting, with profits benefiting morale, welfare and recreation programs for military personnel and their families. These are two very different systems with different histories, running in parallel for more than a century.
For decades, Pentagon officials have discussed the potential consolidation of the commissaries and the three retail systems that make up the military exchanges as a cost-savings initiative. Several analyses have been undertaken — the most recent in 2018 came from a government task force along with representatives from a consulting group. It found that consolidation could save between $700 million and $810 million in the first five years and $400 million to $700 million each year thereafter. Then-Deputy Secretary of Defense Patrick Shanahan said he agreed with the task force’s findings.
A follow-on business case analysis was completed in 2019, and DOD’s chief management officer recommended moving forward with consolidation — despite concerns expressed by leaders of the military services. Then-Deputy Secretary of Defense David Norquist concurred with moving ahead with the merger.
At this point, The Military Coalition (TMC) — a group of military and veterans service organizations, representing nearly 5.5 million combined members of the uniformed services community — became vocal about the issue. Though TMC said it did not oppose consolidation, it urged caution in implementing changes to a fragile military community that may impact other important programs that were funded by the retail operations. In a letter to the Senate and House Armed Services Committees, TMC cited concerns of all the military service leaders that the consolidation would take longer and cost more than anticipated — and would fail to result in promised efficiencies. If these predictions proved accurate, the resale systems would be unable to provide the services (lower-cost groceries and support for morale programs) relied upon and promised to service members, their families and survivors.
TMC’s efforts were successful, resulting in legislation. A provision in the fiscal year 2020 National Defense Authorization Act (NDAA) required the GAO to review the 2018 business case analysis, followed by more reporting requirements in the FY 2021 NDAA.
When the GAO issued its report in April 2020, the oversight agency found serious flaws in the 2018 analysis, estimating consolidation would cost $1.5 billion more than suggested. The GAO report also highlighted several other miscalculations and oversights. For example, original estimates for the development of new, common information technology systems to operate a consolidated system included approximately half of the actual costs. The original report also failed to account for the costs associated with establishing a new headquarters location.
As a result of GAO’s findings, current DOD officials have backed off plans to consolidate the commissary and retail sales operations. A report to this effect was sent to Congress in August by Virginia Penrod, acting under secretary of Defense for personnel and readiness. The projected costs of consolidation have “increased substantially and are now prohibitive,” the Penrod report said.
An official with a trade organization that represents manufacturers and distributors who supply products to commissaries and military retail operations said the increased costs likely would have been borne by customers, along with reduced contributions to quality-of-life programs.
The report also noted that the 2018 analysis had a “single-minded fixation” on cutting costs and diverting the focus away from customers. As an example, the report cited DOD’s 2018 business case analysis that recommended eliminating 20 percent of products — but didn’t cite any customer research to justify that action.
So, the questions are these: How could the 2018 task force and its consultant fail to account for the full costs necessary to build a common IT infrastructure when it knew the commissary system and each of the three exchange systems had their own IT systems — all radically different? How could it have failed to consider the costs of moving to a consolidated headquarters when mergers and technology are items the consulting group highlights on its website? And how could the DOD business case task force and a top management consulting company have missed a focus on the customer?
The recent Penrod report identifies serious miscalculations in DOD’s initial analysis — along with approvals to move forward with the consolidation. Thankfully, the efforts of The Military Coalition demonstrate that oversight works. Despite the criticism Congress may receive, it can do the “right thing” in a bipartisan way, as it demonstrated when it directed the GAO to investigate the proposed consolidation of the military’s resale operations.
Tom Jurkowsky is a retired Navy rear admiral and a board member of the non-profit Military Officers Association of America (MOAA). MOAA advocates for a strong national defense and for military service members. He is the author of the book, “The Secret Sauce for Organizational Success: Communications and Leadership on the Same Page.”