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Pentagon may merge on-base stores

By: tom philpott Military Update
March 18, 2018 Updated: March 18, 2018 at 4:15 am
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tom philpott, 

The three military exchange services and Defense Commissary Agency would be merged into a single resale enterprise under a proposal backed by John Gibson II, the Defense Department's new chief management officer.

Gibson and a team tasked with reviewing military community services - base stores, recreation services, family support services and base schools - have drafted a memorandum, apparently for signature by Deputy Defense Secretary Patrick Shanahan, that would order extensive streamlining.

If signed, the memo would have the Defense Department reconsider, and likely reverse, an Obama administration decision of two years ago not to consolidate commissaries with Army and Air Force Exchange Service and separate exchange services run by Navy and Marine Corps.

"Because of their different approaches to fulfilling their specific missions and delivering their respective benefits, the creation of a single resale entity through consolidation is not recommended," Defense officials wrote in a May 2016 report to Congress.

"It is more appropriate to focus on the short-term goal of achieving greater efficiency in the operation of commissaries and exchanges, and to defer consideration of the feasibility of any merger until these issues have been effectively addressed."

This administration, however, isn't waiting. The departments of Army, Navy and Air Force were given only a few days in mid-March to share their views on the consolidation for resale operations presented in the draft memo.

Sources said the services are concerned about the timing of a complex consolidation, given challenges transforming commissaries into an exchange-like profitable enterprise, using variable pricing of items by region and introducing higher-margin brands.

Brokers and manufacturers supporting base stores say the changes are aggravating an already sharp decline in commissary sales.

Exchange operators say that declining exchange sales mean lower profits, or "dividends," which the services rely on to fund on-base morale, welfare and recreation activities.

A Defense Department spokesman said no official could be made available to discuss the draft memo or concepts it embraces for store system consolidation, for at least a few more weeks.

- To comment, write Military Update, P.O. Box 231111, Centreville, VA, 20120 or email milupdate@aol.com or twitter: Tom Philpott @Military_Update

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