Commissary Changes Would Cut Savings, Drive Away Shoppers: Advocates

Proposed changes to the military commissary system such as price increases or the addition of a private brand could result in fewer customers, commissary advocates told lawmakers at a hearing Wednesday.

"Anytime you mess with the savings ... you risk [shoppers'] loyalty," said Brooke Goldberg, a deputy director of government relations for the Military Officers Association of American. "They rely on that consistency, and so when you change things you risk them leaving and not coming back."

Advocates addressed lawmakers at a hearing of the House Armed Services military personnel subcommittee examining a series of recommendations aimed at ultimately reducing the amount of taxpayer funding the commissary requires to operate.

The system receives about $1.4 billion in annual funding, the bulk of which covers the cost of employees. By law, the commissary sells items at-cost, plus a 5-percent surcharge, which pays for store infrastructure.

A series of recommendations released over the last year includes calls to allow for price increases based on location, employees to switch to a different pay scale and the development of a "private-label" or generic commissary-only brand that could be sold above cost.

The Defense Commissary Agency was ordered by congress as part of the 2016 National Defense Authorization Act to develop a plan for running the system without taxpayer funding by 2019. They also gave officials permission to test new pricing models that would base the cost of goods on market rates near the commissary location in question, rather than on the cost of the item to the commissary system.

But advocates said each of the recommendations comes with its own set of problematic challenges. For example, changing to a private label would require the agency to put in place complicated and expensive systems that it was not designed to manage, said Pat Nixon, the president of the American Logistics Association, a trade group that represents manufacturers.

And any cost increase, even if it still keeps prices below those offered in local civilian markets, could result in families paying more for goods just because the government decided to station them in a high cost of living area, said Eileen Huck, deputy director of government relations for the National Military Family Association.   

"We don't want to see families who are in high cost areas put at a disadvantage," she said.

A new board, the Defense Resale Business Optimization Board, has been established by the Pentagon to roll out that pricing test, though no details are yet available on the locations the department is considering for the pilot program or how the test will be structured.

Commissary reform has been considered by lawmakers for several consecutive years as part of the annual defense authorization process, but ultimately put on hold each time. Lawmakers said that while they are interested in examining commissary issues, they plan to use 2016 to reform the military's healthcare system, Tricare, and don't want to tackle too many major changes at once.

"We are about to consider meaningful changes to the healthcare system of our service members, and there's a compounding effect if we do too many things at one time," said Rep. Tom MacArthur, a Republican from New Jersey. "We need to be very cautious."

-- Amy Bushatz can be reached at amy.bushatz@military.com.