April 30, 2001A Defense Commissary Agency management reorganization plan needs to go back to the drawing board, according to a new General Accounting Office study. The commissary agency, DeCA, runs the military's worldwide grocery store system, which includes 290 stores and more than 19,000 employees. In fiscal 2000, the agency had annual sales of $5 billion and operating costs of $1 billion. In July, DeCA proposed a plan for restructuring its regional management in an effort to generate savings and improve efficiency. Under the plan, DeCA would close management offices at Fort Meade, Md., and Maxwell Air Force Base in Montgomery, Ala., and consolidate much of its Eastern Region's operations at regional headquarters in Virginia Beach. DeCA also proposed transferring management for 25 of its Eastern Region commissaries to its Midwest Region headquarters in San Antonio, Texas. DeCA estimated its plan would net one-time savings of $1.2 million and annual net savings of approximately $4.6 million thereafter. But, the plan focused only on costs and savings created by personnel-related actions, such as relocation and separation costs, and excluded such potential costs as greater facility leasing expenses, according to GAO's report, "Defense Infrastructure: Commissary Reorganization Should Produce Savings but Opportunities May Exist for More" (GAO-01-473). GAO also found that DeCA did not compare its consolidation plan to alternative plans, making it unclear whether consolidating the Eastern Region's operations at Virginia Beach was the best way to increase efficiency. GAO pointed out that the consolidation could result in the loss of personnel with operational expertise. There was also no documented analysis supporting the proposal to shift management for the 25 Eastern Region commissaries to the Midwest Region, GAO found. In response to a draft version of GAO's report, DeCA revised its plan, and found one-time savings could equal $1.5 million and annual savings thereafter would total $3.8 million. The agency also scrapped the management shift until it could further study the feasibility of the transfer. But even after the revision, GAO took issue with DeCA's plan, citing personnel-related cost estimates that were based on assumptions that couldn't be proven. For example, the report said, DeCA "may be optimistic in assuming it will not incur any involuntary personnel separation costs because it believes that everyone who desires employment will retain a job, whether within DeCA or another government agency." In its recommendations, GAO suggested that the agency consult with private-sector grocery retailers on structuring regional operations and consider other restructuring alternatives. In its final response, the Defense Department agreed with all of GAO's findings and suggestions.
April 30, 2001