Consolidation of commissaries and exchange stores gains Pentagon support
March 14, 2019
A key Defense Department office is now recommending that the military’s exchange stores and commissary system be consolidated into one entity, with merger planning already under way.
Lisa Hershman, acting chief management officer for the Pentagon, said the business case for combining Army, Air Force, Marine and Navy exchanges with the Defense Commissary Agency has been approved.
In a March 1 memorandum, Hershman recommended that the Defense Department authorize a new agency or expand the mission of an existing component to “assume jurisdiction” over the DeCA and exchange systems.
The measure still requires congressional backing since it would have to repeal a law that prohibits the consolidation of the military’s commissary and exchange systems.
“The Department’s intent is to improve community services for our Service members and their families, improve support to commanders, and fulfill its fiduciary responsibility concerning appropriated and nonappropriated funds,” Hershman wrote in the memorandum. A portion of exchange revenues is returned to DOD each year to subsidize quality-of-life programs.
Hershman also recommended that Marine Corps Community Services, which integrates functions such as Warfighter and Family Services and its Morale, Welfare and Recreation Program, be included under the newly formed authority.
Military reporter Tom Philpott reported in February that commissaries and exchanges would stay separate stores on base under the plan. A new central governance structure is the focus of plans with an aim at finding efficiencies. Also, AAFES, Navy Exchange and Marine Corps Exchange storefronts would remain unchanged.
The recommendation comes following a special task force’s earlier call to replace the four current retail systems with one. Last May, DOD set up the task force to develop a business case for consolidation.
While the task force found an estimated $700 million to $1.3 billion in savings could be achieved over the first five years, exchange services warned of risks to the shopping benefit if estimated merger efficiencies turned out wrong, Philpott reported.
The on-post stores have faced declining numbers of active duty servicemembers eligible to shop the exchanges and increased competition from online retailers like Amazon. In November 2017, exchanges began allowing honorably discharged veterans to shop its online store tax-free, the first expansion of exchange privileges since 1990, which AAFES expected to bolster its $8.3 billion in annual sales by about $200 million.
On-base shopping privileges are expected to be extended to all service-connected disabled veterans starting in 2020 under a measure in the 2019 National Defense Authorization Act.