Senate Scuttles Commissary Privatization

June 10, 2016

The Senate Armed Services Committee's version of the FY17 defense authorization act included a provision to test privatization of up to five commissaries, an effort repeatedly studied - and repeatedly discredited.

When the bill was brought to the full Senate floor, Sens. James Inhofe (R-Okla.) and Barbara Mikulski (D-Md.) offered an amendment to remove the privatization plan. Thirty seven Senators cosponsored the amendment, and dozens of organizations - including MOAA - provided their support.

The amendment passed by a vote of 70-28.

The news comes as DoD released a report outlining a plan to reduce the reliance on tax dollars for the commissary and the exchange system.

Commissaries would need to increase prices by up to 27 percent to become viable options for private companies to take over. The increase would lead to a projected loss of over $2 billion in sales as patrons shop elsewhere.

The loss of revenue would mean commissaries would need to further increase prices, continuing until “the commissary system prices itself out of existence,” according to the report.

The report addressed past efforts to privatize the commissary system, along with the privatization of existing portions of the system like bakeries, delis, and sushi counters.

Previous attempts at privatization have been unsuccessful. According to DoD, “more than two-thirds of the commissaries serve military populations living in locations that are not profitable for private sector grocers.”

This reinforces a concern brought up by Mikulski, that under a pilot program, private grocers might cherry-pick the locations most likely to be profitable, which would prove the pilot to be successful, when it is not reflective of privatization of the entire system.

The report also reflects the intricacy of benefits tied to the defense resale system, including its relationship with MWR activities, employment for military family members, and scholarships for military children.

The report covered details on the variable pricing models that will be tested, and likely made permanent under the shared language in both the House and Senate versions of the FY17 defense bill.

DoD said it needs more time to discover if there are additional operations that can be privatized that would decrease cost and improve overall efficiency in delivering the benefit. DoD maintains that its first priority remains preserving the benefit for patrons, and closures and reduced savings do not meet that criteria.

MOAA members sent in thousands of messages to their senators opposing commissary privatization. We are grateful DoD and Congress recognized how important the commissary benefit is to the military community, and action to privatize the system is no longer an option in the defense bill.

 

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