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In the ongoing battle to retain commissary benefits, privatization is one option being considered. The hope is that privatization will eliminate the $1.5 billion DeCA budgetary shortfall.
Several large retail companies were asked to provide insight on what such a program might look like. Though the names of those solicited was not revealed, it’s hard to imagine that retailers like Walmart and Target weren’t in the mix.
But is privatization of the commissaries really the answer? Let’s break down this proposal.
Would Prices Go Up?
Many might be surprised to learn that most grocers operate at a profit margin significantly less than the 5% surcharge currently charged by commissaries. And that profit margin includes the cost of facility maintenance, labor, and taxes, plus shipping and distribution. Combined with the national distribution capabilities, massive buying power, and private label options of companies like Walmart, it’s unlikely that the overall cost of most items at a privately managed commissary would go up. We might pay more for some items, but less for others.
However, commissary pricing is almost always less expensive for high-ticket items like dairy and meat.
Would a major retailer be willing to reduce an already skinny profit margin to ensure prices on these items stayed the same?
What about taxes? There is currently no tax at the commissary. Would the same be true for a privately managed facility?
And let’s not forget about our OCONUS commissaries. Is a large retailer in a position to manage these overseas locations?
Are there any restrictions on a private company conducting business in foreign country? Would those restrictions potentially add to the cost of items sold there?
And would a private company be willing to eat losses to ensure service members and their families still have access to the products they need at the prices they can afford? Or would those costs, in turn, cause an increase in pricing at OCONUS locations?
Would Jobs Be Lost?
Approximately 60% of DeCA’s 18,00 employees are veterans, dependents and spouses. Any potential for the loss of jobs is reason enough to give careful consideration to any kind of management transition.
That being said, retailers like Walmart have employment programs for military spouses and veterans.
Is it realistic to assume that some employees would be allowed to keep their jobs? Probably, but the big question is would they be kept at the same rate of pay and offered the same benefits?
And how many current DeCA positions would be eliminated due to duplication within a current private provider’s business structure? Positions like purchasing, logistics, accounting, human resources and others could be in jeopardy.
Will Privatization Create Competition with AAFES?
In a recent report presented to Congress, the success of the AAFES Exchange program relies heavily on a close relationship with commissaries.
But with private retailers, even those typically seen as grocery-only, offering up everything from holiday décor to furniture, would privatization create a conflict of interest? Would those retailers be willing to eliminate those items? If not, would the loss in potential sales at exchanges throw a currently self-supported business model into ruin?
Is Privatization a Viable Option?
With so many questions left unanswered and the unlikely willingness of a major retailer to accept the rules that restrict profit for commissaries, privatization hardly seems like the answer to DoD’s budgetary woes.
But in truth, any push to eliminate or change the program feels likes overkill. While the $1.5 billion budget deficit looks like a large sum, it is less than 1% of the total defense budget.
According to a recent nonpartisan report, every single taxpayer dollar spent equates to nearly double the return in value of benefit given to service members and their families.
Is there any other benefit program that can boast such a claim? And what about a plan B? Should implemented privatization fail to support a pricing structure that provides the same level of value, will additional taxpayer dollars then be called upon to increase service member pay to bridge the gap?
Ultimately, it comes down to this: Are the risks of privatizing the commissary worth the potential loss of such a widely used program? Is it worth the loss or erosion of yet another benefit promised to a community who already sacrifices so much in service to their country?
