A DoD-commissioned task force may have underestimated the costs of a commissary-exchange merger and overestimated the savings it would produce, according to a Government Accountability Office (GAO) report released April 30.

The report’s findings are consistent with MOAA’s concerns regarding the cost associated with a venture this large. GAO highlighted gaps in the business case analysis (BCA) produced by the task force, including:  

• Overestimation in the reduction of costs of goods sold.
• Methodological concerns with cost estimates of information technology costs.
• No cost analysis for expenses that will be associated with moving the location of a consolidated headquarters.

The Military Coalition, a group of military and veterans service organizations (including MOAA) with a combined membership of 5.5 million, has been vocal in ensuring costs do not impact morale, welfare, and recreation (MWR) projects funded through Exchange profits.

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The task force initially estimated consolidation will cost $700-$810 million in the first five years and $80 million annually thereafter. Senior defense officials stated seed money for the first year would be fronted by the services, however it is unclear where they will get this money and what programs will suffer because of it.

MOAA wants to ensure safeguards are in place for MWR funding and the defense resale system, and that any cost savings associated with a merger go directly to MWR funding and family programs.

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Timeline of Events

May 29, 2018: Then-Deputy Secretary of Defense Patrick Shanahan states that he agrees with the recommendation from the task force to consolidate the defense resale enterprise “to achieve the economies and efficiencies necessary for the survivability of the defense resale enterprise and the continued availability of these benefits to our total force, their families, and other authorized patrons.”

July 2018: DoD’s Enterprise Management Task Force starts a BCA on consolidation of DeCA and the three exchange systems.

March 1, 2019: The task force completes its study, and DoD’s Chief Management Officer (CMO), Lisa Herschmann, announces a recommendation to move forward with consolidation of DeCA and the three exchanges. This recommendation is made without inclusion of additional concerns and comments made by leadership of both the services and the exchanges.

Aug. 19, 2019: Deputy Secretary of Defense David L. Norquist concurs with recommendations presented by DoD’s CMO and task force to move ahead with a merger.

Dec. 20, 2019: The FY 2020 National Defense Authorization Act (NDAA) is signed into law, including a provision for the GAO to conduct a study on the validity of the BCA.

April 30, 2020: The GAO report recommends a reassessment of the BCA to address methodology and measure gaps in the previous study, and to provide additional comments and concerns of the services to Congress on the potential merger.

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MOAA eagerly awaits DoD’s responses to the recommendations outlined in the GAO report with a goal of ensuring a fair and sound assessment is done to make the best decision for the defense resale system.