Defense Commissaries are not the bargains they should be, report finds

One of the perks of military service is supposed to be access to discount groceries at defense commissaries. But as food prices are rising, commissaries aren’t as much of a bargain as they should be, according to a new Government Accountability Office (GAO) report. The study found that Defense Commissary Agency (DeCA) sites offer savings that are less than expected, though still lower than shopping at commercial grocery stores.

DeCA has a goal of offering military personnel and their families a global 23.7 percent discount over local grocery stores, though that can vary by country and region. However, actual savings are less.

“In fiscal year 2021, DeCA estimated that its overall savings rates for CONUS [Continental United States] customers was 17.7 percent, [six] percentage points or approximately 25 percent lower than the global target,” GAO said.

This compared to a 42.7 percent savings for overseas locations, which account for 19 percent of DeCA sales. “The savings rate from overseas stores is essentially boosting the global savings rate,” Elizabeth Fields, a director in GAO’s Defense Capabilities and Management section, told Sandboxx News.

To some extent, that comparison is misleading. DeCA estimates savings in the continental U.S. by conducting price comparisons, including in-person shopping at local stores, which GAO considers a reliable system. In contrast, overseas price comparisons are made through an indirect system that uses the local cost of living adjustments (COLA) rather than actually checking prices in grocery stores.

Nonetheless, the study highlights a contradiction in DeCA’s mission, which is how to offer subsidized goods while not costing the U.S. government money. In 2016, the agency was mandated to use a margin-based system in which prices would cover its operating costs, and thus reduce the need for government subsidies.

“These two objectives of generating savings and increasing margin can be in tension with one another, particularly if the targets set for each are incompatible,” GAO noted.

“Specifically, if DeCA raises the prices on certain items to generate more margin (and therefore reduce its reliance on appropriations), the savings to the customer on those items decreases. Conversely, if DeCA lowers prices to provide more savings to customers, DeCA’s ability to generate a margin decreases,” the office added.

“DeCA is not seeking to be self-sufficient,” Fields told Sandboxx News. Its goal is “just to reduce its reliance on appropriations. The roughly $1 billion it receives in appropriations funds the operating costs of the commissaries and headquarters, [including] salaries and wages. DeCA officials report that the margin generated on sales is used to offset shortages in funding and to reduce reliance on appropriations.”

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This is somewhat reminiscent of a problem faced by the U.S. Postal Service, which struggles to operate on a self-funded basis. It also resembles the dilemma of private supermarkets, especially during a time of high inflation, when raising prices is needed to offset higher costs, but this can drive away customers and ultimately result in lower revenue.

DeCA’s annual sales have already fallen from $6 billion in 2014 to $4.4 billion in 2021.

“Currently, according to DeCA officials, only 1.5 million out of 8 million eligible customers shop at the commissaries regularly,” the study said. “According to these same officials, if DeCA did not have to focus on generating margin to offset regular operating costs, it would invest in advertising to the approximately 6.5 million eligible customers that choose not to shop at the commissaries.”

GAO made several recommendations for DeCA, including devising a better system for calculating savings at overseas commissaries, and identifying what services the agency can provide or cut – including cutting the hours when commissaries are open – based on various levels of Congressional appropriations.

Ultimately, DeCA’s ability to offer discount groceries may depend on how much Congress is willing to spend. For the 2023 defense budget, the House Armed Service Committee has proposed adding another $500 million to subsidies for the agency.

Michael Peck is a contributing writer for Sandboxx and Forbes. He can be found on Twitter and LinkedIn.

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