C.J. Wax

C.J. Wax (Lisa Burgess / S&S)

ARLINGTON, Va. — Bringing the three armed service exchange systems under a single umbrella will not result in store closings or operations that are turned over to a private contractor, the senior Pentagon official in charge of the consolidation effort told Stripes on Wednesday.

“Privatization is not on the scope,” said C.J. Wax, a retired Air Force major general who formerly headed the Army and Air Force Exchange Services (AAFES). Nor are store closings, he added.

The point of consolidation is not to cut back on customer service, but to enhance it, Wax said in an interview in his new Pentagon office.

“There is no other retailer on the planet that can do what the exchanges do today,” Wax said.

Consolidation “is to protect, preserve, and improve delivery of this benefit … and [get] the dividends back to [morale, welfare and recreation programs] that are so critical.”

Wax was appointed to head the consolidation by Principal Deputy Undersecretary of Defense for Personnel and Readiness Charles Abell, who was told by Deputy Defense Secretary Paul Wolfowitz in March to figure out the most efficient and cost-effective way to organize and operate the exchanges as a single entity.

Before the merger can go forward, however, Congress will have to change a 1999 law that bars consolidation or privatization of the three exchanges, which include AAFES, the Navy Exchange and the Marine Corps Exchange.

The exchanges serve between 10.5 million to 11.5 million customers each year, Wax said. Stores are located not only on bases, but also aboard ships and at remote deployment sites.

Studies over the years from a variety of organizations, including private analysts and the Congressional Budget Office, have estimated that consolidation could save anywhere from $13 million to $200 million a year.

But some exchange officials, members of Congress, and advocates for military families have expressed concerns about consolidation.

Questions include whether postmerger revenue from the exchanges would be equitably distributed back to the individual services’ MWR programs; whether stores might close; and fears that consolidation may actually be the first step to privatizing the stores.

Wax offered his assurances that funding MWR will remain the “core” purpose underlying the exchange operations.

Wax said it would take his staff of six about two years to develop a consolidation plan, followed by another year to get Congressional approval and change the law.

The consolidation itself should take about two years, he said.

A big part of consolidation will be eliminating the duplicate functions and departments now embedded in each organization, such as logistics operations, finance and accounting, personnel, and so forth, Wax said.

But first, Wax’s staff will decide which service is running its exchange the most effectively in any given area, such as information technology.

“It’s pretty obvious that of the three [exchanges], one of them will be better than the others,” he said. “We’ll select the best system from the competition among the three, and apply it to all of them.”

Wax’s staff will also look at how the most successful civilian retail stores operate for ideas on how to improve various aspects of the exchanges, he said.

“We’re going to keep this an open process,” Wax said, seeking opinions from military advocacy organizations that represent all the exchange major customer groups — servicemembers, families, and retirees — as well as service officials, suppliers, and most of all, exchange officials and personnel.

“The real experts are at the exchanges,” Wax said. “These are honest, talented folks.”

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