Updated July 20 to correct list of business reforms implemented by the Defense Commissary Agency.
The Defense Commissary Agency (DeCA) used unreliable and inconsistent methodologies to calculate the annual savings realized by commissary shoppers, resulting in inflated savings figures, according to a Government Accountability Office (GAO) report released in June.
The study, required by the FY 2021 National Defense Authorization Act (NDAA), highlighted concerns with DeCA’s conflicting goals and savings rate calculation methods. DeCA strives to meet two primary objectives: To be a benefit to servicemembers and their families by providing the target savings rate to its customers, and to operate like a business to reduce its reliance on appropriated funds.
DeCA operates 236 commissaries worldwide, all funded by both appropriations and revenue from the sale of goods. As commissary sales have fallen from about $6 billion in FY 2015 to about $4.4 billion in FY 2021, DeCA has worked to implement business reforms such as variable pricing and sale of private label goods.
Since 2016, DeCA has had a global target customer savings rate of 23.7%, which it says has been met or nearly achieved over the last several years. The average savings for CONUS patrons in FY 2021 was 17.7%, compared with 42.5% for OCONUS patrons. When calculated to reflect the 81% of CONUS commissary sales and 19% of OCONUS sales, the average savings rate was 22.4%.
The report found the savings rate calculation for CONUS commissaries is accurate, as it relies on market-based price comparison data from two sources: manual shoppers and syndicated data. Yet the calculation methodology for OCONUS commissary savings relies on cost-of-living adjustment (COLA) rather than actual price data.
For example, DeCA selects a CONUS coastal region to use as a basis, then multiplies the customer savings rate of the selected region by the COLA for the OCONUS region. The savings rate calculated is unreliable because COLA includes the cost of many unrelated, non-grocery items such as transportation, services, income taxes, and so on. Additionally, DeCA does not conduct actual price comparisons of items in OCONUS commissaries against the price of similar items charged by local competitors.
GAO provided three recommendations to DeCA:
- Conduct and document an analysis of whether the OCONUS customer savings rate methodology provides comparable accuracy to a market-based price comparison and make appropriate adjustments.
- Conduct an analysis of tradeoffs that specifically identify the customer savings rate and related benefits, such as number, location, and operating hours of commissaries, that it can provide at varying levels of appropriation.
- Update the strategic plan and supporting documentation to include all business reforms and identify goals with associated performance measures, milestones, and deliverables.
DeCA concurred with all recommendations. In this time of inflation and DoD’s efforts to reduce food insecurity among military families, the commissary benefit is especially important.
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