A recent overhaul of the defense commissary program aboard military installations will result in higher costs for its customers, according to a recent MilitaryTimes report.
New rules, which were put in place as part of the latest annual defense authorization act allow the defense commissaries, or DeCA, to up the prices on about 1,000 products in 10 stores. Additionally, all 238 commissaries were authorized to raise prices on national brand products.
According to MilitaryTimes, this will allow officials to explore how the overall impact of raising these prices might help them to reduce operating costs that taxpayers cover, which currently sits at about $1.3 billion annually.
Before the rollout of the overhaul, DeCA was able to sell items at the commissaries at cost plus 5 percent. Under the new system, DeCA is able to purchase items at a reduced rate, but sell them at their previous rates or higher.
For example, if DeCA purchases a product at $.10 cheaper than before, it might not sell that product for the reduced price at the commissary, MilitaryTimes explains.
That extra cash might go, instead, toward operating costs or toward lowering the price of a different product, or both.
One of the issues with this new system, according to MilitaryTimes, is that the consulting company who designed it may be benefitting financially. MilitaryTimes claims that "unofficial reports from members of industry" say that Boston Consulting Group (or BCG) stands to make between 50 and 60 percent of the amount prices are reduced.
So that dime savings per sale of a particular item might net BCG between a nickel and 6 cents per unit sold.
DeCA officials are unable to confirm those claims, saying instead that the details of extra awards, fees or incentives for BCG won't be available until they are "determined at a later date", MilitaryTimes says.
Chris Burns, the executive director of business transformation at DeCA, told MilitaryTimes that the money DeCA saves is going toward reducing product prices or toward operating costs, but MilitaryTimes could not determine if consulting fees were included in those operating costs.
The effects of the overhaul are being felt elsewhere, as well. Some national brands who are pressured to lower prices below cost are pulling their items from the commissary altogether, MilitaryTimes reports. They claim that "multiple sources" are saying that other programs, like scholarship donations, could be cut.
Some good news does come out of the overhaul, however. DeCA will begin rolling out store brand items later this month that should be cheaper than national name brands.
While Congress approved the Department of Defense's DeCA program, they are keeping a close eye on it and on whether it actually saves anyone money, MilitaryTimes says.