Pentagon wants permission to combine three exchanges
April 4, 2003
WASHINGTON — The Pentagon will go forward with plans to ask Congress for its blessing to combine the military’s three exchange services into one, in spite of critics who say the move would hurt shoppers.
“It’s the intent of the [Defense] Department to initiate a process to eventually consolidate the three exchange services,” Charles Abell, principal deputy undersecretary for Personnel and Readiness, told some members of Congress during a Wednesday hearing.
Michael Downs, director of Personnel and Family Readiness Division of the Marine Corps, was the most vocal panelist objecting to combining exchange services.
“In my view, the exchange systems aren’t broken,” Downs told members of the Total Force Subcommittee of the House Armed Services Committee.
He said consolidation would force the already-efficient Marine Corps system to take a hit in the profits that all the exchange services must use to pay for Morale Welfare and Recreational programs.
Several years ago, the Corps combined its exchanges, family services, voluntary education programs and MWR programs, and the consolidation boosted efficiency and increased the dividends paid to MWR, he said.
And at least one congressman agreed no change is needed in the status quo.
“It isn’t broken as far as I can see,” said Rep. Ed Schrock, R-Va., a former sailor.
“Perhaps it’s my devious mind, but I fear consolidation of this nature is the first step in trying to privatize the [exchange] services, and that means they’ll go away,” he said. “In the private world, they have to be able to be profitable.”
Abell told the members the Pentagon is committed to finding best business practices.“It would mean one [information technology] system, not three; one chief financial officer, not three; one human resource officer, not three,” Abell said. If a review proves consolidation is not beneficial, he said leaders will abandon the plans.
Private companies consolidate all the time, but when they do, “there’s a compelling business reason to do a merger,” said Rear Adm. William Maguire, commander of Navy Exchange Service Command. He indicated he is not convinced there is a reason to merge the military exchange services, and worries that unique Navy needs, such as exchange services on ships, would not be met by a large bureaucratic system.
Maj. Gen. Kathryn Frost, commander of the Army and Air Force Exchange Services told the congressional panel: “I’m not opposed to something that intuitively tells me that a business case can be made.
“I am the commander of the [consolidated] Army and Air Force service, so we know it can work,” she said.
A 1999 law bars consolation and out-right privatization of the three exchange services, which is why the Pentagon must seek Congressional approval to overturn that ruling.
If approved, the merger won’t happen for at least five years, Abell said.
First, it will take Pentagon planners two years from the word go from Pentagon leadership — which has not happened — to devise a game plan to present to Congress.
Then, Congress will need at least a year to hold hearings and to make any changes deemed necessary before military officials can implement change, which would take another two or three years.
It will be a process, Abell said, that “will be transparent to the consumer.”
But similar promises were made during the consolidation process of the Defense Commissary Agency, and customers suffered, Downs said.
“It was not easy and it was not invisible to the patron,” he said, saying initial complications left some commissaries with “shelves that were two-thirds stocked.”