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Tom Philpott: Quarrel over commissary pricing continues

By: Tom Philpott, Military Update
March 18, 2017 Updated: March 24, 2017 at 7:45 am
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Defense Commissary Agency officials say they correctly calculated the "baseline" shopper savings Congress insisted be verified and preserved as commissaries are transformed into more business-like grocery operations.

The agency contends it determined savings by region using price comparison techniques that reflect more accurately than in the past the way commissary patrons actually shop for groceries on base and at local retail outlets.

Advocates for patrons are skeptical. They suggest the commissary approach isn't what Congress portrayed last year when it directed that existing discounts be accurately measured and protected. The agency, critics contend, appears to have taken steps to dampen savings targets so they are easier to meet as it strives to cut operating costs. Paring the annual commissary appropriation of $1.3 billion, after all, is indisputably the primary purpose behind transformation of base grocery stores.

The most troublesome step to explain is why the agency used discounted private label products sold by retailers as a significant element in revising savings calculations, at a time when commissaries only sell brand name items. That decision alone, the agency said, could have lowered baseline savings by up to two percentage points.

Commissary officials last month gave conflicting reports on whether it weighted the baseline results at all, or at least sufficiently, to neutralize the impact of comparing retail private label prices to brand name products in commissaries.

For decades, up until this year, the agency claimed commissaries saved patrons, on average, more than 30 percent compared with prices at commercial outlets. As defense budgets tightened, the Obama administration, backed by the Joint Chiefs, urged Congress to allow deep cuts to commissary appropriations so the money saved could be diverted to more pressing readiness needs.

Two years ago, a study from Boston Consulting Group, which now has several contracts in support of commissary transformation, estimated that actual shopper savings were closer to 17 percent, which might be preserved even as commissaries became more efficient through the adoption of commercial retail practices.

Last year Congress authorized commissaries to phase out the tradition of selling only brand products and of pricing them always at cost plus a surcharge. Instead, commissaries will embrace variable pricing, reduce brand name products and introduce its own private label goods, like commercial grocers do, to offer lower prices on the shelves, expand profit margins and cut the annual taxpayer subsidy.

Congress stressed, however, that the agency must first calculate existing patron savings, by region, and then protect the savings during transformation so that shoppers see no diminution in the value of their benefit.

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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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