Defense Commissary Agency

1300 E Ave., Fort Lee, Virginia 23801-1800
Tel: (804) 734-8134 DSN 687-8134
FAX: (804) 734-8248 DSN 687-8248

Release Number: 54-96
Date: September 20, 1996
Contact: Bonnie Powell, DeCA Public Affairs Specialist

DeCA Taking Steps Toward PBO Success

On Oct. 1, the Defense Commissary Agency (DeCA) begins to adopt characteristics of a private-sector company as the first performance based organization (PBO) in the federal government. Right now, Pentagon officials are considering measures that will help DeCA make PBO a reality by saving money and increasing efficiency.

DeCA operates 309 grocery stores worldwide with sales of more than $5 billion per year. These sales generate nearly $1.6 billion per year in savings for customers - almost twice what the Agency's appropriation would buy in direct military compensation.

"DeCA was nominated as a PBO because it has a solid track record in customer service and operating efficiency," says Steve Rossetti, Executive Director, MWR and Resale Activities (OASD/FMP). "PBO status gives employees and managers the opportunity to approach the 21st century as a front-runner in government reinvention."

Put simply, becoming a PBO is all part of a federal initiative to make government work better and cost less. DeCA will begin to take on characteristics of a private-sector business to increase efficiency and service to customers.

"Our military is changing," says Rossetti. "The stress of increased deployments and more working families demands that DeCA evolves with state-of-the-art practices that provide our military people with time-saving value."

"We've already saved as much money as we possibly can since the commissaries were consolidated under DeCA in 1991," says Director of Operations John F. McGowan. "We've cut costs by nearly $300 million, we're more efficient, and we've improved service to the point that the commissaries were picked as the top non-pay military benefit in the 1995 Customer Service Survey. But in order to preserve the benefit we need to move to the next level and become a PBO."

Before PBO changes can become realities, DeCA will need Department of Defense (DOD) waivers and legislation to amend regulations and federal law. The DeCA "wish list" includes changes that will: streamline buying and accounting practices, reduce costs of necessary services, and streamline personnel services.

According to DeCA Legislative Liaison Dan Sclater, "We're only in the initial stages of becoming a PBO. We have sought, and successfully received, some administrative waivers and we've drafted a legislative package. This will be an ongoing process," says Sclater. "The leadership within the Department and the Office of Management and Budget has been very helpful and I expect them to continue working closely with us."

Probably the single most significant change under consideration will require congressional legislation. It's the concept of a single fund for DeCA's budget. By law, according to Director of Resource Management Gary Lutz, DeCA's budget has three distinct funds. Money for operations, stock, and surcharge is budgeted for, and accounted for, in three separate "pots." Not only is it inefficient and expensive to keep track of three different funds, but DeCA currently has no leeway to move money from one to the other as needed.

"We've reduced resale inventory investment over $100 million since DeCA was established, but we can not use these savings anywhere else," says Lutz. "The backlog of facility maintenance and repair, such as leaking roofs or deteriorated floors, could have been eliminated if DeCA had been authorized to use these one-time savings. In the private sector, you could move this cash to where it is needed and provide the best return on investment to the business," he says.

The single fund or Military Commissary Revolving Fund concept has the support of Under Secretary of Defense Comptroller John J. Hamre. He is encouraging DeCA to submit a legislative proposal for Fiscal 1998 asking for the combined fund.

The ability to actively seek providers that can offer the same or better service than government providers, at a lower price, has also been high on DeCA's priority list. In some cases, DeCA is really looking for more flexibility within the existing guidelines. McGowan says progress has already been made on some DeCA initiatives, including reducing the costs of phone service.

"Some of the requests have resulted in compromises that will end up saving us money, even without waivers," says McGowan. In other words, the possibility of losing DeCA as a customer has other government agencies looking at themselves with a more critical eye.

DeCA is required to use wide area network services from the Defense Information Systems Agency (DISA). But service has been expensive and DeCA has been low on the customer "priority" list, resulting in frequent disruptions of service during data transmissions. A commercial carrier might be able to provide the same or better service at a lower cost - if DeCA were allowed to look.

According to Rosita Parkes, DeCA's Director of Information Resource Management, the situation has changed dramatically in the case of DISA. "DeCA represents 11 percent of DISA's Fiscal 1997 revenue base for use of the non-secure network and is its largest customer in terms of number of sites," she says. "They've given us great cooperation and we now expect to have a 20 percent reduction in our bill next year." DeCA has also been moved up higher on the priority list. The relationship with DISA will be revisited next year.

The same situation could hold true for the way the Agency ships groceries. DeCA is required to use the Defense Transportation System (DTS), which charges fees for the service. In order to move groceries to overseas commissaries, DeCA is essentially supporting the readiness of the military supply transportation system, at a higher cost than could be obtained through commercial carriers. "It's a big issue," says McGowan.

Each year DeCA ships approximately 21,000 tractor trailer-size containers to commissaries overseas. According to Arlene Ripp, manager of DeCA's transportation business unit, "we're a big part of DTS's business. The problem is, DeCA is a peacetime shipper but is asked to support war readiness. All DTS customers have to pay higher rates to compensate for increased transportation expenses."

DeCA is asking for waivers that would allow it to seek less expensive transportation from commercial carriers or to adjust the budget so it doesn't reflect costs not actually incurred by DeCA. "There's no easy solution," says Ripp. "We recently met with budget people from the Office of the Secretary of Defense (OSD) and I think they came away with a better understanding of the situation. If we are expected to operate on a PBO budget, then there has to be budgetary considerations for times when DeCA is supporting military readiness." If the waivers don't materialize, says Ripp. "At least we have shown OSD that we want to be efficient, but some outside factors are out of our control."

On the personnel front, Director of Personnel and Training Wynn Hasty says legislative initiatives are still being developed, but he is already seeing action on waiver requests. "A lot of it is simply asking for favorable interpretations of policy and regulations," he says. For example, the concept of regionalized personnel servicing had its beginnings when DeCA was forming in 1991. "The DOD model then was 60 or 70 employees to one personnel specialist and our ratio has been about 100- to -1, which is DOD's target ratio for Fiscal 2000 when modernization and automation systems are in place," says Hasty. "In addition, high grade reductions face DeCA and all other defense activities. Many military positions have been converted to civilian by law and those positions frequently have to be filled with high grade civilians." For DeCA, forced reductions in high grade positions would mean a crippling loss of leadership.

Hasty says DeCA will be getting short term relief from high grade reductions. "Without it, we would have been at 101 high grade positions by 1999. Now we will have 118, an adjustment made by the department due to military conversions and mission transfers." The entire federal government is attempting to downsize support personnel, "but we've asked them to hold off on reductions until we can determine the proper levels of personnel for DeCA," says Hasty.

"We are also seeking greater authority to test new systems and programs and evaluate how well they impact our mission and corporate culture." A recent Midwest Region test of a new method of hiring commissary cashiers resulted in dramatic reductions in time and paperwork. A similar hiring test is also taking place in Europe. "We'd like to be able to explore more concepts and technology from the retail world to better serve the customers," says Hasty. "I think we've done extremely well so far."

The waivers and legislative initiatives extend to asking for flexibility in regulations controlling how government agencies buy products. "We are uniquely qualified to be a test agency for a change in the rules," says Director of Acquisition Management Crosby H. Johnson. "There are a lot of hoops you have to jump through in contracting to buy commodities. That makes sense for some DOD agencies," says Johnson "But we don't buy tanks and guns. We buy and sell groceries." Whether it's beef or display cases, "most of what we buy is unique to commissaries."

Johnson says they are looking for legislation that will allow DeCA to spend less time on the lengthy process of contracting and more on finding the best value. "Dollars are an important factor, but they shouldn't be the only factor. When we're the only users of a product, the regulations just cost money and time," says Johnson. "And whether it's a new butcher knife or a floor-cleaning machine, we think we ought to have it there when the stores need it!"

The waiver and legislative process will continue through DeCA's PBO transition period. As a PBO, DeCA will strive for excellence through the SAVER 2000 program. SAVER stands for Service, Access, Value, Efficiency and Response.

"The SAVER 2000 program is as significant for our customers as it is for the Agency," says McGowan. "The banners and buttons represent our pledge that DeCA is looking toward a new century of value and service. We're renewing our commitment to: Service for our patrons, Access to modern stores, Value to our customers in the form of quality merchandise at low prices, Efficiency in savings to taxpayers, and Responsiveness to our patrons, business partners and taxpayers."

"DeCA expertise linked with emerging technology and commercial grocery techniques are a potent mix," says Rossetti. "I have every confidence that employees and managers will step up to the plate and use the PBO bat to hit another one out of the park!"

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