Detailed Information on the
Defense Commissary Agency Assessment

Focusing on maintaining long-term internal customer satisfaction and reducing cost to taxpayer by planning to restart DeCA's competitive sourcing program beginning in FY 2009.

Continuing to use Government Accountability Office and Department of Defense Inspector General evaluations to improve commissary effectiveness and to identify improvement opportunities.

Updating baselines and performance measures for the 2007 Balanced Scorecard. Baselines for performance measures added in 2006 are being reviewed for validity and should provide auditable trends.

Measure: Customer Savings

Explanation:Sustain Customer Savings. Savings are tracked using a comprehensive database of actual prices of items sold and scanned by DeCA and competition grocery and super center chains using standard industry procedures. A market basket sampling approach is used to compare non-scannable or non-standardized items like produce and meat. This measure tracks average savings patrons achieve by shopping in the commissaries. The 30+ percent reduction in their grocery bill means that commissary patrons have more money left over to spend to increase their quality of life.

Measure: Resale Stocks (Sales)

Explanation:Resale Stocks (Sales). Resale Stocks reflects the revenues from the sale of products by the commissary stores. Products offered include groceries, meat, poultry, fruits, vegetables, dairy products, health and beauty aids, household products, and pet supplies. The Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) provides DeCA's fiscal year resource authority in the annual operating budget (AOB). Targets missed in FY 2001 and FY 2002 as military community adjusted to increased security for installation access after events of 9-11-2001.

Measure: Customer Transactions

Explanation:There are over 12 million people who are authorized to shop in the commissary. They include active duty military, retired military, National Guard and Reserve, 100% disabled veterans, Medal of Honor recipients, and overseas civil servants. An aggressive outreach effort to reach all elements of the eligible patron demographics has improved the visibility, and therefore the accessibility of the commissary benefit. Customer transactions continue to increase along with commissary sales and customer satisfaction. DeCA also provides semiperishable and perishable products to 42 American Embassies under European command and 26 Security Assistance Associations (SAO) under Southern Command.

Measure: Commissary Customer Service Survey

Explanation:Commissary Customer Service Survey (CCSS). The CCSS is a DeCA internal survey that is conducted annually to assess patrons overall satisfaction with the commissary system. The CCSS rating scale is from 1 to 5, with 1 being very poor and 5 being very good.

Measure: American Customer Satisfaction Index

Explanation:American Customer Satisfaction Index (ACSI). The ACSI is produced annually through a partnership of the University of Michigan Business School, the American Society for Quality, and the internal consulting firm Claes Fornell International (CFI) Group. The ACSI is a uniform independent measure that is general enough to be comparable across sectors, industries, and organizations of the U.S. economy. The ACSI is measured as a multivariable set of equations and utilizes cause and effect relationships to explain customer loyalty and ties that loyalty to customer satisfaction.

Measure: Commissary Operations (Costs)

Explanation:Commissary Operations (Costs). Commissary Operations funds the costs of operating the commissary system. Specific costs include civilian and military labor, labor contracts, travel, transportation of commissary goods overseas, and other indirect support. Its primary revenue source is funds appropriated by Congress. However, Commissary Operations also receives additional income from manufacturers' coupon redemption fees, handling fees for tobacco products, and reimbursements for other support. The Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) provides DeCA's fiscal year resource authority in the annual operating budget (AOB). The FY06 costs include $22M for foreign currency fluctuation that was approved by OUSD(C) in last year PBD cycle. However, the costs for the foreign currency fluctuation were not included for FY07-11. In addition, FY07 reflects a one-year Defense-wide reduction of $25.5M as a result of PBD 713, plus an additional one year reduction of $5.5M for efficiencies in PBD 426.

Measure: Surcharge Obligations

Explanation:Surcharge Obligations. Surcharge obligations are incurred under the Surcharge Collections Trust Fund. It is a trust fund primarily funded by a 5 percent surcharge applied to patron sales at the checkout counter. This fund also receives revenue from prompt payment discounts, the sale of used cardboard and equipment, and services provided to others. These obligations are for store information technology, store maintenance, store equipment, and the commissary construction program. There is no requirement for appropriated fund support. DeCA may request additional obligation authority for Surcharge Collections from the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) when revenue is expected to exceed the current budgeted revenue projections. OUSD(C) may increase DeCA Surcharge obligation authority based on revised revenue projections over and above the applicable President's Budget. Additional revenue projections are normally due to increased sales and acts of God. The measure is a percentage of obligations to total Surcharge authority provided on the apportionment document.

Measure: Facility Condition Index

Explanation:Facility Condition Index (FCI). The FCI is a numerical expression of the physical state of a commissary store. The FCI is a weighted measure of a commissary's condition, refrigeration system, and energy usage and efficiency. The FCI reflects the overall condition of commissary plant and facilities and DeCA utilizes it as a leading indicator in assessing the effectiveness of the investment of surcharge funding in the physical facilities program. NOTE: The FCI goals were originally developed in FY 2000 based on facility capital investment budgets that were at least $70 million more than that included in the budget for FY 2005 through FY 2009. The incremental increase for each annual goal was straight lined from the FY 2000 baseline to the FY 2009 end goal. No attempt was made to calculate a specific goal for each year based on projected investments for that specific year. The FCI goals were reevaluated and realigned in FY 2006 due to information technology reducing construction budgets and decreased buying power due to higher construction costs. In addition, BRAC has already closed several commissaries and the current BRAC and Global Basing will close a significant number of commissaries (30+/-). Many of these facilities are modern stores and/or are in good physical condition with a good FCI score.

Measure: Major Construction Project Execution

Explanation:Major Construction Program Execution. DeCA plans, directs, and manages the engineering and construction missions of the agency. Major construction represents a significant portion of DeCA's surcharge funds and is highly visible among not only the patrons but also Congress. DeCA's primary focus for this process is the execution of the fielding plan. In addition, it is critical to track DeCA's congressional limits for the construction funds (125% of approved construction funds is the congressional limit). This program tracks DeCA's overall cost, schedule, and performance in managing its major construction projects. Project plans are established at Award and are under configuration control of DeCA leadership. The overall project rating is determined by DeCA leadership. DeCA's facility construction program internally tracks each major construction project's actual performance against planned cost and schedule milestones from date of contract award. Each project is assigned a score of either "Green" for on time and at or under cost within minor variance; "Yellow" for projects behind schedule or over cost within an additional variance, and "Red" for projects seriously behind schedule or over cost. DeCA's Balanced Score Card rolls up these measurements under "Major Construction Project Execution" founding PART as follows. GREEN: 80 percent or more of projects are "Green" and none are "Red" YELLOW: 50 percent of 79 percent of projects are "Green" and none are "Red" RED: At least one project is "Red" or 49 percent or less of projects are "Green"

Measure: Competitive Sourcing (Percent of 6392 positions to study)

Explanation:Competitive Sourcing. Competitive sourcing is the process whereby commercial activities are studied to determine whether the activities should be performed under contract with commercial sources or in-house using Government personnel. The President's Management Agenda assigned DeCA a goal to complete competitions on 50 percent of the commissary system's inventory of positions subject to competition by the end of Fiscal Year 2005. DeCA exceeded that goal by completing competitions on 3,572 positions, which comprise 56 percent of the inventory. The National Defense Authorization Act (NDAA) for Fiscal Year 2006, Sec 672 Requirements For Private Operation Of Commissary Store Functions is amended to read "Until December 31, 2008, the Defense Commissary Agency is not required to conduct any cost-comparison study under the policies and procedures of Office of Management and Budget Circular A-76 relating to the possible contracting out of commissary store functions." During this period, DeCA will be reengineering its workforce and some of its actions under that initiative may qualify for competitive sourcing credit; however, they cannot be predicted with any certainty, and therefore, a DeCA goal for competitive sourcing has not been established for FY 2006-2008 and the first quarter of FY 2009. The benchmarking completion rate measures how efficient DeCA is in completing competitive sourcing studies. Since these studies save on average 20 percent or more, the measure shows DeCA's progress in reducing cost and increasing efficiency of the operation of its commissaries. Beginning in 2009, the target changes to the number of full-time equivalent (FTE) positions that are studied for competitive sourcing in that year.

Measure: Internal Controls Over Financial Reporting

Explanation:Internal Controls over Financial Reporting. (Reference Office of Management and Budget (OMB) Revised Circular A-123, Management's Responsibility for Internal Control.) This revised Circular A-123 provides updated internal control standards, as well as new requirements specifically for management to assess the effectiveness of its internal controls over financial reporting. Appendix A of the circular provides a separate assurance statement concerning the internal control effectiveness over financial reporting and applies to the 24 Chief Financial Officers Act agencies.

Measure: Audit Results of Financial Statements

Explanation:Audit Results of Financial Statements. DeCA, as part of DoD, is required to prepare annual financial statements. These financial statements must be prepared in accordance with OMB directives, which implement the Chief Financial Officers Act of 1990 (CFO Act). DoD uses the information on DeCA's annual financial statements to prepare the DoD annual financial statements. DeCA uses an independent auditing agency annually for validation and certification of all financial statements. DeCA received Unqualified Auditors' Opinions on its financial statement for 2002 through 2005 and has now incorporated this target in its Balanced Scorecard.

Is the program purpose clear?

Explanation: The Defense Commissary Agency operates a retail grocery system in the United States and throughout the world to permit of members of the uniformed (predominately military) services, retired members, and dependents of such members to purchase American groceries at cost wherever U.S. military are stationed. Only authorized users, not the general public is not permitted to shop at commissaries. The purpose is to promote quality of life of the military member, thereby helping to recruit and retain the quality armed force needed to defend American interests thorough the world. The commissary system is considered an integral component of the military compensation package, providing the military community stationed throughout the world significant savings on recognizable American products in a safe and secure environment.

Evidence: 10 U.S.C. § 2481, Defense commissary and exchange systems: existence and purpose, provides in pertinent part: "(a) Separate Systems. The Secretary of Defense shall operate, in the manner provided by this chapter and other provisions of law, a world-wide system of commissary stores and a separate world-wide system of exchange stores. The stores of each system may sell, at reduced prices, food and other merchandise to members of the uniformed services on active duty, members of the uniformed services entitled to retired pay, dependents of such members, and patrons authorized to use the system under chapter 54 of this title. (b) Purpose of Systems.??The defense commissary system and the exchange system are intended to enhance the quality of life of members of the uniformed services, retired members, dependents of such members, and to support military readiness, recruitment, and retention." The Foreword to DoD 1330.17-R, Armed Services Commissary Regulations (ASCR), April 1987, clarifies that Congress authorized the operation of "??military commissaries as an integral element of the military pay and benefits package??[and that] the intent of the commissary system is to provide an income benefit through savings or discount purchases on food and household items necessary to subsist and maintain the household of the military member and family??. Based upon this stated intent, the military commissary system is considered an essential and appropriated funded activity." 10 U.S.C. §2484, Commissary stores: merchandise that may be sold; uniform surcharges and pricing, subsection (e) provides in pertinent part: "Sales price establishment. (1) The Secretary of Defense shall establish the sales price of each item of merchandise sold in, at, or by commissary stores at the level that will recoup the actual product cost of the item." Actual cost consists of the manufacturer's invoice price plus an allowance for shrinkage (currently 1%). The invoice price includes first-destination transportation costs; second-destination transportation costs for shipping items overseas are paid with appropriated funds. DoD Directive 5105.55, Defense Commissary Agency (DeCA), November 9, 1990, Department of Defense Reform Initiative Directive #37 Revised - Oversight of the Defense Commissary Agency, December 23, 1998, and DoD 1330.17-R, delineate the operational parameters of the Defense Commissary Agency.

Does the program address a specific and existing problem, interest, or need?

Explanation: The commissary system is part of the military compensation package. It supplements military pay and benefits (which are above average for similarly aged and educated civilians), generous health care, and retirement benefits. Eligible patrons can purchase groceries in commissaries at prices 30 percent or lower than that available in commercial grocery stores. In addition troops stationed overseas can purchase American groceries at these same low prices. Cost of living allowances for military members are adjusted based on availability of commissaries. Commissaries help to enhance the quality of life of members of the uniformed services, retired members, and their dependents and support military readiness, recruitment, and retention. In addition, commissaries provide a sense of community and security on military installations, particularly in overseas areas. Commissaries help provide an American "taste of home" to U.S. military stationed overseas.

Evidence: Ninth Quadrennial Review of Military Compensation, 2002, updated yearly. Patron savings are one of the performance measures reported on the Agency's Balanced Scorecard. Based on market surveys, the average commissary shopper is able to saving approximately 32 percent on the purchase of groceries. In addition, for military families stationed overseas, commissaries located on U.S. military installations provide a safe and secure place to shop, which has become more important since 9-11. Beneficiary categories are contained in 10 U.S.C. chapter 54 and generally delineated in DoD 1330.17-R, Armed Services Commissary Regulations (ASCR), April 1987. 37 U.S.C 403b provides the cost of living adjustments for military members be adjusted when commissaries are not available. 10 U.S.C. 2481 provides that commissaries are intended to enhance the quality of life of members of the uniformed services, retired members, dependents of such members, and to support military readiness, recruitment, and retention.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: While there are many commercial groceries near U.S. bases, none are able to match the significant discount military commissaries are able to provide military patrons, since private sector grocery stores have additional expenses (e.g., taxes) and do not receive taxpayer subsidies to pay operating costs. Thus, no other program provides members of the military grocery goods at such a significant discount. While there are other entities that provide the same output (i.e., groceries), there are no other programs that address the same problem, interest, or need. The commissary benefit is an integral element of the total compensation package for military members providing food and other merchandise at cost. It is designed to enhance the quality of life of members of the uniformed services and their families and support military readiness, recruitment, and retention. It provides a secure source for American products in a safe and secure shopping environment.

Evidence: DoD Directive 5105.55, Defense Commissary Agency (DeCA), November 9, 1990, Department of Defense Reform Initiative Directive #37 Revised - Oversight of the Defense Commissary Agency, December 23, 1998, and DoD 1330.17-R, Armed Services Commissary Regulations (ASCR), April 1987, delineate the operational parameters of the Defense Commissary Agency. The Foreword to DoD 1330.17-R clarifies that Congress authorized the operation of "??military commissaries as an integral element of the military pay and benefits package??[and that] the intent of the commissary system is to provide an income benefit through savings or discount purchases on food and household items necessary to subsist and maintain the household of the military member and family??. Based upon this stated intent, the military commissary system is considered an essential and appropriated funded activity." 10 U.S.C. § 2481, Defense commissary and exchange systems: existence and purpose, provides in pertinent part: "(a) Separate Systems. The Secretary of Defense shall operate, in the manner provided by this chapter and other provisions of law, a world-wide system of commissary stores and a separate world-wide system of exchange stores. The stores of each system may sell, at reduced prices, food and other merchandise to members of the uniformed services on active duty, members of the uniformed services entitled to retired pay, dependents of such members, and patrons authorized to use the system under chapter 54 of this title. (b) Purpose of Systems.??The defense commissary system and the exchange system are intended to enhance the quality of life of members of the uniformed services, retired members, dependents of such members, and to support military readiness, recruitment, and retention. ?? (d) Reduced Prices Defined.??In this section, the term "reduced prices' means prices for food and other merchandise determined using the price setting process specified in section 2484 of this title." 10 U.S.C. §2484, Commissary stores: merchandise that may be sold; uniform surcharges and pricing, subsection (e) provides in pertinent part: "Sales price establishment. (1) The Secretary of Defense shall establish the sales price of each item of merchandise sold in, at, or by commissary stores at the level that will recoup the actual product cost of the item."

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: While the operation of the commissary system is essentially a commercial activity, DeCA operates under statutory and other governmental restrictions that do not exist for private-sector, retail grocery stores. Examples of impediments to efficient business-like operations include: the inability to access the private financial markets (e.g., lines of credit), statutory restrictions on the use and accounting of funding, and the requirement to follow Federal personnel regulations. The Civil Service system does not possess the flexibilities conducive to efficient business-like operations. For example, the current Civil Service classification system is rigidly structured and reduces management's flexibility in assigning work and adjusting the pay of employees who acquire new job skills and abilities without difficulty. The current pay system is longevity based and not performance based. Effecting employee discipline and removing employees is governed by time consuming adverse action procedures. The implementation of the National Defense Personnel System will correct many of these deficiencies. Procurement requirements, such as set asides for small business, NISH and NIB, fulfill the Government's socio-economic missions, but also increase the cost of providing the commissary benefit. Finally, unlike supermarkets that can sell drug-store type items, the commissaries generally cannot sell non-grocery store items that would be sold by military post exchanges, thus limiting the value of the commissary benefit to the patron. Patrons expect a supermarket shopping experience equal or better to what they can find in the civilian marketplace, where supermarkets commonly sell general and seasonal merchandise such as greeting cards, motor oil or lawn furniture, which cannot be found in the commissary. Regulations also limit the ability to quickly adapt to emerging business trends and satisfy the desires of the patron base. These limitations affect the value of the benefit and impact the effectiveness and efficiency of the commissary system. The Agency must also comply with systems procurement regulations designed to vet weapons systems to obtain permission to purchase its cash register system simply because of the dollar amount of the total acquisition. In addition, the statutory requirement to operate a commissary system limits the availability of the commissary benefit to those that actually shop at commissaries. Many of the eligible patrons do some or all of their grocery shopping shop outside the commissary system.

Evidence: The current state of the law regarding the commissary benefit is codified in 10 U.S.C., chapter 147. The regulatory structure governing the commissary benefit is provided in DoD Directive 5105.55, Defense Commissary Agency (DeCA), November 9, 1990, Department of Defense Reform Initiative Directive #37 Revised - Oversight of the Defense Commissary Agency, December 23, 1998, and DoD 1330.17-R, Armed Services Commissary Regulations (ASCR), April 1987. The commissary system is required to use the personnel, procurement and financial systems of the Government instead of those developed to address its specific interests. It is also required to comply with other departmental requirements, some of which provide little value added oversight. For example, the Defense Commissary Agency is currently in the process of replacing its cash register system. Because of the dollar value of that acquisition, even though that procurement will be funded with surcharge dollars and not funds appropriated by the Congress, compliance with DoD Directive 5000.2 was required. Description and Decision Authority for ACAT I - III Programs, DODI 5000.2, Operation of the Defense Acquisition System, a MAIS program will be classified as ACAT IA if the dollar value of AIS estimated by the DoD Component Head to require program costs (all appropriations) in any single year in excess of $32 million in FY 2000 constant dollars, total program costs in excess of $126 million in FY 2000 constant dollars, or total life-cycle costs in excess of $378 million in FY 2000 constant dollars.).

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Statutes and Department regulations clearly specify which individuals are eligible to shop in the commissaries, thus excluding ineligible individuals and avoiding unintended subsidies. In addition, DeCA has a rigorous process for establishing and closing commissaries to ensure that resources are effectively targeted to reach intended beneficiaries in a cost-effective manner. This program ensures that U.S. produced food items are available for sale to active duty military, retired military, National Guard and Reserve, 100% disabled veterans, Medal of Honor recipients, and specified overseas civil servants. Commissaries are established and continued based on the presence of an active military mission and active duty personnel, thus commissaries operate where they can best serve the needs of the active duty personnel. The commissary benefit is available to the vast majority of military personnel who live on or near a military installation. The cost of living allowance is adjusted for those personnel without access to a commissary. DeCA continues to explore alternatives to bring a commissary benefit to military personnel without ready access to a commissary

Evidence: 10 U.S.C. §2482 Commissary stores: criteria for establishment or closure; store size, provides "(a) Primary Consideration for Establishment.??The needs of members of the uniformed services on active duty and their dependents shall be the primary consideration whenever the Secretary of Defense??(1) assesses the need to establish a commissary store; and (2) selects the actual location for the store. (b) Store size.??In determining the size of a commissary store, the Secretary of Defense shall take into consideration the number of all authorized patrons of the defense commissary system who are likely to use the store. (c) Closure Considerations.??(1) Whenever assessing whether to close a commissary store, the effect of the closure on the quality of life of members and dependents referred to in subsection (a) who use the store and on the welfare and security of the military community in which the commissary is located shall be the primary consideration. (2) Whenever assessing whether to close a commissary store, the Secretary of Defense shall also consider the effect of the closure on the quality of life for members of the reserve components of the armed forces. March 18, 2005, policy memorandum, Under Secretary of Defense (Personnel and Readiness), SUBJECT: Criteria and Process for Establishment, Continuance, and Disestablishment of Commissaries, which modified the provisions of DoD 1330.17-R, Armed Services Commissary Regulations (ASCR), April 1987. As Acting Director Patrick B. Nixon observed in his Statement for the Record for the March 15, 2006 hearing before the Military Personnel Subcommittee of the House Armed Services Committee, we continue "?? to partner with manufacturers and distributors to offer truckload sales of authorized commissary products at Guard and Reserve Centers." See also, page 3, DeCA Update, February 24, 2006, Best Practices In Guard and Reserve Outreach and. Press Release 65-05, Virtual Commissary Opens For Business, October 20, 2005.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The Defense Commissary Agency has a number of performance measures for its retail grocery operation: * Grocery Sales Volume * Cost of Grocery Operations * Facilities Condition Index * Customer Satisfaction * Customer Savings The Agency has no measures for its impact on military recruiting, retention, or readiness.

Evidence: Strategic long term goals and corporate objectives are in the current FY 2005-2009 Strategic Plan, DeCA's FY 2006 Balanced Scorecard (BSC) and the FY 2007 President's Budget Submission. Long-term performance measures that focus on outcomes are located in DeCA's FY 2005-2011 Performance Plan, and the first semi-annual Performance Report for FY 2005 (October 1, 2004 to March 31, 2005), and the second semi-annual Performance Report for FY 2005 (1 April 2005 to September 30, 2005). DeCA has been tracking these performance measures to increase productivity and efficiency. From 2001 to FY 2005, DeCA tracked sustaining customer savings at 30%, increasing customer sales, improving customer satisfaction, the Facilities Condition Index, commissary operations (costs), surcharge obligations, unit costs, and civilian full-time equivalents. From FY 2001 to FY 2005, DeCA increased customer savings from 30.4 percent to 32 percent, sales increased from $5,058.1M to $5,368.6M, and customer transactions increased from 93.7M to 94.4M. Unit costs and annual appropriations in constant dollars have remained steady since FY 2000. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005). From FY 2001 to FY 2005, the Commissary Customer Service Survey increased from 4.33 to 4.55 on a scale from 1 to 5 with 5 being very good. The DeCA score on the American Customer Satisfaction Index (ACSI), an independent assessment of retail business in America, increased from 75 in CY 2002 to 77 for CY 2005. The industry average ACSI score was 74 for CY 2005, a statistically significant difference. The August 2005 Defense Manpower Data Center Active Duty Survey indicates that 90 percent of Active-Duty members or family members have used the commissary in the past 12 months and 82 percent were satisfied or very satisfied with their commissary.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: While DeCA has targets for the long-term measures, these are focused on modest incremental improvements. DeCA's goal is to sustain the benefit without increasing appropriated costs. DeCA has developed its FY 2006 Balanced Scorecard (BSC) utilizing the Norton and Kaplan perspectives of Financial, Internal Business/Process, Customer, and Learning and Growth. The BSC tracks key performance metrics, including such areas as sales, costs and surcharge obligations, to ensure the Agency can fulfill its goal of increasing the value of the commissary benefit without increasing its cost. DeCA's BSC complements the DoD BSC risk management framework. Performance measures have been identified and goals have been aligned for FY 2006-2011. Where possible, FY 2005 actual results for each measure were added to show trends. DeCA has already met its long term internal customer satisfaction goal and now strives to maintain it. DeCA reports quarterly on all performance measures to the Commissary Operating Board and semi-annually to OSD. DeCA summarizes these results in an annual comprehensive report on the commissary benefit. As a measure of efficiency, constant dollar unit costs and annual appropriation since FY 2000 have remained steady. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005).

Evidence: DeCA Balanced Scorecard and DeCA annual Performance Plan.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: DeCA's goal is to sustain the benefit without increasing appropriated costs. The FY 2005-2009 Strategic Plan for the Defense Commissary Agency, the previous DeCA Performance Plans, and DeCA's FY 2006-2011 Balanced Scorecard (BSC) contain annual performance measures to achieve DeCA's goals of (1) preserving and delivering the premier quality of life benefit by providing an efficient and effective worldwide system of commissaries for the resale of groceries and household supplies at the lowest practical price (consistent with quality) to military members, their families, and other authorized patrons, while maintaining high standards for quality, facilities, products and service; (2) implementing business process improvements to enhance corporate performance; and (3) being the employer of choice. The BSC tracks key performance metrics, including such areas as sales, costs and surcharge obligation, to ensure Agency can fulfill its goal of increasing the value of the commissary benefit without increasing its cost.

Evidence: DeCA has consistently tracked performance measures to increase productivity and efficiency. From FY 2001 to FY 2005, DeCA increased customer savings from 30.4 percent to 32 percent, sales increased from $5,058.1M to $5,368.6M, and customer transactions that are tracked internally increased from 93.7M to 94.4M. As a measure of efficiency, constant dollar unit costs and annual appropriation since FY 2000 have remained steady. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005). From FY 2001 to FY 2005, the Commissary Customer Service Survey increased from 4.33 to 4.55 on a scale of 1 to 5 with 1 being very poor and 5 being very good. The DeCA score on the American Customer Satisfaction Index (ACSI), an independent assessment of retail business in America, increased from 75 in CY 2002 to 77 for CY 2005. The industry average ACSI score was 74 for CY 2005, a statistically significant difference. DeCA's strong customer satisfaction leads to a below-average customer complaint rate of 8 percent compared to the average industry complaint rate of 14 percent. The Defense Manpower Data Center provides independent assessments through their surveys of active duty, reserve, and retired personnel. As an example, DMDC's August 2005 Active Duty Survey indicates that 90 percent of Active-Duty members or family members have used the commissary in the past 12 months and 82 percent were satisfied or very satisfied with their commissary. In July 2005, the report GAO-05-798 Military Compensation, Table 2, showed cost increases for pay and non-pay elements of military compensation, including a line for "installation based benefits" defined as: "Includes exchanges, commissaries, childcare, DOD dependent schools, and other morale, welfare and recreation costs." GAO reported that in FY 2004 constant dollars, the combined cost of installation based benefits increased by 20 percent. Source data obtained from GAO shows that the commissary component of this rollup rose 0.3 percent while installation based benefits' cost increased by 19.7%. (Rounded to whole percentages in the GAO report. Per GAO authors, installation based benefits were $4,371,704 in FY 2000 and $5,233,086 in FY 2004. The commissary component of this rollup was $1,120,194 for FY 2000 and $1,123,400 in FY 2004.)

Does the program have baselines and ambitious targets for its annual measures?

Explanation: DeCA has identified baselines for all performance measures. The key measures have been tracked since FY 2000, the majority dating back to FY 2001. New performance measures that were added to DeCA's Balanced Scorecard (BSC) in FY 2006 will have baselines starting in FY 2006. All performance measures have targets out through FY 2011, which is in alignment with the FY 2007 President's Budget submission, dated February 2006.

Evidence: DeCA's Strategic Plan, prior Performance Plans and associated semi-annual Performance Reports, and current BSC contain performance measures baselines, with most dating back to FY 2001. The new performance measures that were added to DeCA's BSC will have baselines established as of FY 2006. All performance measures show auditable trends analysis and display ambitious outyear targets and goals.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: DeCA went under a Performance Contract as part of a process which involved all stakeholders through creation of the Commissary Operating Board (COB). The commissary benefit Strategic Plan and performance measures and goals are developed in strategic planning sessions with participation by personnel from every level within DeCA and the COB. The plan was vetted with selected trading partners (manufacturers and distributors), other providers within the military resale system, and representatives of the military departments. The Strategic Plan is reviewed and approved by the Commissary Operating Board comprised of the representatives of the Military Services and Departments. Previous performance plans and the current Balanced Scorecard (BSC) are reviewed and approved by the Commissary Operating Board and then sent to the Under Secretary of Defense (Personnel and Readiness) for approval. DeCA works closely with the Commissary Patron Council, and with business partners including those represented by American Logistics Association, Armed Forces Marketing Council, and Coalition of Military Distributors on issues affecting DeCA.

Evidence: Department of Defense Reform Initiative Directive #37 (Revised) - Oversight of the Defense Commissary Agency, provides the direction for corporate oversight of the defense commissary program by the Military Departments to ensure the funding of commissary operations meets the level of support and performance goals of the military patrons. DeCA reports its progress on accomplishing its performance measures and targets through the Commissary Service Support Committee, the Management Oversight Committee, the Resource and Capital Investment Committee, and the Commissary Operating Board.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Yes. DeCA uses a variety of Government Accountability Office (GAO), Department of Defense Inspector General reviews and independent private sector financial and program reviews. For example, stores are randomly inspected for compliance with Agency policies and procedures, as well compliance with laws and regulations, by the Agency Inspector General Office.

Evidence: A variety of sources are used to provide recurring and independent information for evaluation of the commissary program effectiveness and to identify improvement opportunities. A key performance indicator, for DeCA, is the level of patron savings. This is represented by a comparison of Agency retail prices versus commercial grocery counterparts. This analysis is conducted on an annual basis. DeCA employs the services of a qualified independent financial audit firm to "certify" its financial statements annually. In the critical performance metric of customer satisfaction, DeCA utilizes a jointly developed survey instrument (Commissary Customer Service Survey (CCSS)) to measure actual customer satisfaction across its patron base on an ongoing basis. DeCA also uses the external American Customer Satisfaction Index (ACSI), an independent assessment of retail business in America, that is produced annually through a partnership of the University of Michigan Business School, the American Society for Quality, and the internal consulting firm Claes Fornell International (CFI) Group. The Defense Manpower Data Center provides independent assessments through its surveys of active duty, reserve, and retired personnel. As an example, DMDC's August 2005 Active Duty Survey indicates that 90 percent of Active-Duty members or family members have used the commissary in the past 12 months and 82 percent were satisfied or very satisfied with their commissary. In the security area, DeCA goes through a number of vulnerability and program inspections annually, both at headquarters and at its stores. GAO has provided reviews and recommendations on DeCA reorganizations and small business opportunities which have been implemented. Dove Consulting provided an assessment in 2004 on the feasibility of variable pricing and private label groceries, which did not recommend either of these initiatives. There are no independent evaluations comparing commissary and private grocery store costs. One reason is that commercial grocery stores and chains are reluctant to share operational information. DeCA uses survey instruments which provide customer feedback to assess outcomes and performance (the CCSS has gone from 4.33 in FY 2001 to 4.55 in FY 2005 on a scale of 1 to 5 with 1 being very poor and 5 being very good). The DeCA score on the ACSI, an independent assessment of retail business in America, increased from 75 in CY 2002 to 77 for CY 2005. The industry average ACSI score was 74 for CY 2005, a statistically significant difference. DeCA's patron savings have gone from 30.4% in FY 2001 to 32.0% in FY 2005, resulting in a $2700 annual savings for a military family of four using the Bureau of Labor Statistics Consumer Price Index.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: DeCA has been tracking performance measures to increase productivity and efficiency by using an internal DeCA program evaluation system modeled on the OMB Performance Assessment and Rating Tool (PART) consistently in budget justification documentation, management actions, and in legislative proposals. This statement refers to DeCA's program evaluation done in February 2003. DeCA is part of DoD's Working Capital Fund and as such its budget includes all costs to operate DoD's commissary system except those cost centrally budgeted by OPM for the entire Federal government, i.e., a portion of the accruing cost of retirement for current Civil Service Retirement System employees and the full accruing cost of post-retirement health benefits for current civilian employees.

Evidence: DeCA utilized the performance information and DeCA program evaluation ratings (Section II: Strategic Planning) consistently in the development of previous budget submissions and in the FY 2007 President's Budget (PB) submission, dated February 2006. One hundred percent of metrics are associated with total budget authority. Exhibit Fund 5 in the PB displays the Total Cost Per Output Summary for Commissary Operations. Exhibit Fund 12s, one for Commissary Resale Stocks and one for Commissary Operations, display Performance and Quality Measures that link to the categories of Quality and Customer Satisfaction. Attachment 3 to the PB displays the use of Performance Metrics, Working Capital Funds, 100 percent of which are associated with performance metrics.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: To preclude deficiencies, DeCA consistently reviews Agency operations and progress and conducts annual strategic planning sessions to review and revise, if necessary, the goals and objectives contained in the Corporate Strategic Plan and Balanced Score Card (BSC). The BSC performance measures, with associated goals and targets, are reviewed and refined to reflect adjustments made to the Agency's strategic plan. Lean Six Sigma is DeCA's chosen methodology to offer certain tools for the review and streamlining of activities that occur "above store" and actually deliver the day-to day needs of the stores.

Evidence: DeCA's Corporate Strategic Plan provides the operating guidance (specified in DeCA Director's Policy Letter 500-01, dated September 2, 2005), designed to take the Agency into the future; the plan is the basis for DeCA's mission, values, vision, goals and objectives. During the annual strategic planning process, DeCA assesses its operating environment (internally and externally) to identify its strengths, weaknesses, opportunities and challenges and determines the most probable future for the defense commissary program. The strategies, action plans, metrics and milestones developed and executed are designed to better serve the Agency's customers, workforce and partners, as well as integrate its business processes and enhance corporate performance. For example, from FY 2004-2006, DeCA reengineered its corporate processes above store level to improve support to the stores (268 worldwide) and position the Agency for challenges it is facing. These challenges include integration of DeCA's planning initiatives with DoD's Base Realignment and Closure (BRAC) process, the Overseas Integrated Global Presence Basing Strategy (OIGPBS), A-76 competitive sourcing, National Security Personnel System, technology advances and marketplace changes. DeCA has further consolidated its corporate and regional store support functions, such as procurement, comptroller, operations, and human resources, at DeCA headquarters, Fort Lee, Virginia. Timing of this above-store level reengineering is consistent with BRAC guidance. DeCA expects to complete above-store reengineering implementation in FY 2006-2007. At the store level, DeCA has also implemented a prototype store concept to streamline store operations while enhancing workforce skills to develop a multi-skilled workforce, to better position stores for competitive sourcing studies. DeCA instituted the first prototype store at Smokey Point, Washington, in January 2005, and a second store at Grand Forks, North Dakota, in August 2005. The next deployment is scheduled for September 2006, at the five commissaries in Hawaii. DeCA's Strategic Plan provides a road map to improve and enhance the commissary benefit without increasing costs, while keeping service to the stores and customers at the forefront. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005). The plan is the integrating tool that clearly links strategic, tactical and daily initiatives throughout the Agency, while supporting the President's Management Agenda, the Department's BSC concept and the Government Performance and Results Act.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: DeCA monitors performance measures on a regular basis and conducts execution reviews at various levels within the organization (from corporate to store level). These include quarterly business reviews where individual store, zone and region performance is evaluated. These reviews include information concerning trading partners such distributor fill rates, timeliness of deliveries, and merchandising support from manufacturers and/or brokers. The information garnered from these reviews is used to make mid-course corrections, or when required, programmatic changes. The Agency's Marketing Business Unit constantly reviews category performance, product performance and pricing on the resale goods offered in commissaries. DeCA receives and reviews performance information on each store through the Annual Commissary Assessment Report. Information such as unit cost, surcharge generated, and sales is provided. The internal Commissary Customer Satisfaction Survey rates 14 separate elements by store.

Evidence: The success of these monitoring efforts is reflected through the Agency performance in increased sales, customer satisfaction and savings. Category reviews are conducted in accordance with the procedures specified in GAO-03-160, Defense Commissaries: Additional Small Business Opportunities Should Be Explored, December 2002. Agency operations are reviewed by the DoD IG. The Agency key performance measures are also reviewed by the Commissary Operating Board.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: The strategies in the President's Management Agenda (PMA) are essential elements of performance for all Federal managers. Furthermore, DeCA senior management's accountability is specified in Defense Reform Initiative #37-Revised. The Agency performs periodic reviews of program partners and their managers to evaluate their cost, timeliness and performance of their respective mission in support of commissary benefit. These include such defense activities as the Defense Logistics Agency (DLA), the Defense Finance and Accounting Service (DFAS), the United States Transportation Command (TRANSCOM), the Defense Information Systems Agency (DISA), and each defense installation hosting a commissary. DeCA also evaluate the ancillary services provided by the United States Treasury. The Agency has no grantees or contractors in a program partnership relationship.

Evidence: One hundred percent of the performance plans for Agency personnel have incorporated the requirements of the PMA. As a result of the reviews conducted by the Agency it has been determined that the most effective method to obtain resale merchandise for the commissary is by DeCA contracting for those goods directly. Consequently, in separate reviews, resale support for grocery items, meat and produce, as well overseas distribution, previously provided by DLA, was assumed by DeCA resulting in improved product availability, reduced cost to the patron and the Government, and streamlined business processes heavily relying upon e-commerce. The improved use of e-commerce and contracting process reduced the demand made on DFAS streamlining the bill paying process (DeCA generates the most invoices in DoD) as substantiated by DFAS-Columbus data. The review of the process related to the overseas shipment of goods by TRANSCOM resulted in DeCA assuming the direct booking function of its cargo which reduced order-ship times and cost. Reviewing the communication requirements necessary to support delivery of the worldwide commissary benefit reveals that commercial circuits, rather than DoD's non-secure circuits network, would be more cost effect and reliable in conducting e-commerce transactions. The Agency constantly reviews its Inter-Service Support Agreements to ensure that required services are received at reasonable costs. An example of the results these reviews was the discovery at several installations that the commissary was being billed for electricity furnished to their activities. These discoveries resulted in the separate metering of utilities. The Agency also works very closely with the United States Treasury to support credit and debit transactions, banking functions and returned check collections. A review of DeCA processes resulted in a new and more effective "Returned Check Management" program through partnership with the Treasury.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: DeCA has established unified business rules and processes. The strategy is communicated throughout the Agency and tied to execution of funds. All changes are executed quickly to support business needs. Funds are obligated in a timely manner and spent for the intended purpose. DeCA provides quarterly updates to the Improved Financial Performance and Budget and Program Integration President Management Agenda initiatives. DeCA has also started to participate in OSD(C)'s Financial Statement Scorecard DeCA is part of the Defense Working Capital Fund (DWCF) because of its customer/provider relationship with commissary patrons and the Military Services. The DWCF is a revolving fund, which means that it relies on revenue to finance its operations. The purpose of a revolving fund is to generate enough revenue to cover the full cost of operations, and to finance its continuing operations without fiscal year limitation. A revolving fund operates on a break-even basis over time; that is, it neither makes a profit nor incurs a loss. Business Areas within the DWCF generate funds to replenish the cash corpus by accepting customer orders. The Business Area delivers the goods or services ordered using the funds in the corpus, and then bills the customer based on the rates set for those goods and services. The fund is replenished when the customer pays the bill to DWCF. DeCA has two Business Areas under the DWCF (Resale Stocks and Commissary Operations). The main sources of revenue for the Business Areas are customers' purchase of commissary items and the annual appropriation provided by the Congress to pay for the costs of operating the commissary system. DeCA's equipment, supplies & services are currently reported via DD350 electronic forms through the DoD Standard Procurement System (SPS) Procurement Desktop Defense (PD2). Resale awards (grocery items) are reported electronically via DD350 through the use of PC350 -- a stand alone contract reporting system first developed by the Air Force. All reports are gathered at the Secretary of the Army Acquisition, Logistics and Technology website (SAALT), which submits reporting information to the Department of Defense. As of October 1, 2006, all reporting for DeCA-generated contracts will be reported either directly into, or through the use of PD2 into, the Federal Procurement Data System - Next Generation (FPDS-NG).

Evidence: DoD(C) conducts quarterly reviews of the commissary program funding execution versus planned program to ensure funds are obligated timely and for the intended purpose. In addition, the Commissary Operating Board is being provided financial execution reviews three times per year. The FY 2001 Consolidated Balance Sheet and the FY 2002, FY 2003, FY 2004, and FY 2005 Financial Statements for the Defense Commissary Program received an unqualified audit opinion from the independent accounting firm of Klynveld Peat Marwick Goerdeler. DeCA has scored green under both the Improved Financial Performance and Budget and Performance initiatives under the President's Management Agenda for over two years in a row. As of January 30, 2006, DeCA no longer had to report metrics to the Defense Manpower Data Center President's Management Agenda site on Improved Financial Support. The Department now will use metrics that support the Improved Financial Performance initiative directly from the Financial Improvement and Audit Readiness - Planning Tool (FIAR-PT). The FIAR- PT measures the accomplishment of specific, approved activities designed to produce more accurate, timely and reliable financial data, and that will help the DoD to accomplish a favorable audit. DeCA will begin reporting its financial statements data under the Financial Statement Scorecard starting with the second quarter of FY 2006. Government purchase card utilization is reviewed and approved at all levels of DeCA on a monthly basis. The effectiveness of the Agency's oversight is reflected in receiving a zero deficiency report.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: In 2002, the Agency restructured the organization to link planning, system engineering and program management to enable it to fully evaluate proposed actions, test proposed systems and manage the execution of programs to be fielded. This reorganization has been very effective in ensuring development of efficient programs measuring the effectiveness of a program's execution. At the heart of our reengineering efforts is the establishment of goals to best deliver the commissary benefit in a manner that balances the best interest of the patron and the taxpayer. Its purpose is to drive unnecessary costs out of the system so that we can reinvest those dollars to sustain the value of the commissary benefit without increasing costs to the tax payer. To that end we have focused our reengineering efforts to optimize our business processes using Lean Six Sigma. We have recently completed the first phase of six projects. Examples of processes examined include equipment inventory accountability and replacement, standardizing commercial activity contracts, and revising receiving procedures to better adopt commercial practices to account for shortages and breakage. One area where DeCA has a measurement program is energy efficiency. DeCA's energy efficiency program is driven by annual training in energy and refrigeration maintenance management; high-user analysis; on-site energy audits; billing and energy use troubleshooting by region-based task forces; and implementation of energy efficiency projects. Progress is measured by analysis of monthly energy use and cost of each product (e.g. electricity, natural gas, hot water, water, etc.) reported quarterly to DeCA Headquarters and by an energy use index (EUI) with units of Btu/square foot/year.

Evidence: The procurement of our new front end system, the Commissary Advanced Resale Transaction System (CARTS), came in well below the government estimate. Awarded to IBM, the contract offered a much more technologically advanced system than that currently in use, relying on less hardware and thus a cheaper maintenance tail. Those technological advancements saved commissary patrons $92 million in surcharge funds. The Agency was above target for our DoD A-76 target goals at the end of Fiscal Year 2005, the legislation enacted last year (10 U.S.C. §2485(a)(2)) placed a moratorium on performing A-76 studies in our stores until December 31, 2008, providing an unexpected opportunity to deploy the prototype workforce without having to simultaneously conduct A-76 studies in our stores. We believe that the time offered by this moratorium will allow us to build a workforce that (1) meets DeCA's need for a more flexible workforce, (2) positions DeCA's employees for a smoother transition to the National Security Personnel System (NSPS), and (3) positions the government workforce to be more competitive in future A-76 studies. The DeCA Energy Program continues to be one of the best in DOD Energy Efficiency Program by virtue of its energy awareness program and aggressive Utility Task Forces in DeCA East, West and DeCA Europe. DeCA has reduced its energy use 13.6% since our FY 1995 base year as reported in our annual report to DoE through DoD. Several efficiency procedures and measures are under development or in place as a result of DeCA's use of Lean Six Sigma analysis. Property Accountability is one example. A DeCA Lean Six Sigma team determined that purchase of bar code scanners and associated emerging technology, along with staff training, increased efficiency of property inventory tracking compared to the previous paper-based methods. A single-store test in February 2006 measured improved outputs including speed and accuracy of inventory taking, and immediate availability of automated reconciliation reports. As this efficiency procedure is deployed throughout the commissary system, its outputs are expected to improve the outcome of Property Accountability. The measurement is the variance between records in the Defense Property Accountability System (DPAS) and actual inventory data. The baseline is the Fiscal Year 2005 variance of $13.3M, or 2.6 percent against a total acquisition value of $514.5M. The performance goal is a 1% variance for the Agency. Based on gains already documented by DeCA's Property Accountability Branch, this goal is projected to be achieved during Fiscal Year 2007. As part of the DoD 5000 review process for ACAT IA programs, DeCA and the Department of Defense developed a major procurement strategy that saved $92M in surcharge funds (customer generated trust fund) compared to alternative strategies as measured by the difference between alternate estimates and actual contract award. DeCA regularly measures and reports on cost, schedule, and performance regarding the ongoing acquisition of CARTS (the new customer checkouts and related business system for commissaries) beginning with the Acquisition Program Baseline (APB) at Milestone B. Updates to the APB are provided quarterly to the Department of Defense through the Defense Acquisition Executive Summary system. Additional reporting is provided every six months through the OMB-300, and every year through DoD Investment Review Board certification using the Defense Information Technology Portfolio Repository. Contractor performance is monitored and reported using the CARTS Quality Assurance Surveillance Plan.

Does the program collaborate and coordinate effectively with related programs?

Explanation: Commissaries have long been viewed as the cornerstone of Quality of Life for the military. Because of their visibility in the military community, commissaries are ideal vehicles to assist in placing messages of interest to the military community at the forefront. These include working with other benefit programs, such as WIC and Food Stamps or other military activities for the betterment of the military community. The Agency has effectively coordinated with State Program Coordinators administering the Federal Food Stamp and Women, Infant and Children (WIC) programs in the 46 States in which a commissary exists. The Agency was instrumental in assisting TRICARE in its implementation of the Department of Defense WIC Overseas program. Examples of military partnerships include: Partnering with TRICARE, DeCA has developed the "It's Your Choice, Make It Healthy" program to highlight those healthy foods available in military commissaries. Commissaries worldwide participated in a unique partnership with the Federal Voting Assistance Program and the Department of Defense to encourage all members of the uniformed services, retirees and their families to register and vote. Since commissaries are among the most visited locations on any installation, we made a significant contribution toward increasing awareness among military families of the importance of registering to vote. DeCA began working closely with the Service's New Spouse Programs in 2005 to ensure that new spouses joining the military family are familiarized with the commissary benefit. This also familiarizes spouses with potential employment opportunities. We were also pleased to be able to assist the Department in informing our patrons about the Military OneSource program. Military OneSource is the newest member of the DoD military family support team. Its website provides a wealth of information and advice to military families on topics ranging from family support issues, debt management, and legal assistance contacts to how to obtain a plumber. In order to streamline the returned check process, DeCA collaborated with the Defense Finance and Accounting Service, the Treasury Department, Bank of America, and Solutran. The Armed Services Exchanges recognize the drawing power of the commissaries to bring patrons to the installation and increase exchange sales. DeCA and the Exchanges cooperatively implemented Department policy not to subsidize tobacco by having DeCA sell exchange tobacco inventory at exchange prices, instead of at cost. DeCA and the Exchanges normally co-locate commissaries and exchanges to provide more convenient shopping for patrons and have also cooperated on a test of the sale of impulse items in commissaries, supplied by the exchanges and sold at exchange prices as authorized by House Report 108-767 to accompany the FY 2005 National Defense Authorization Act.

Evidence: With over 94 million customer transactions in FY 2005, the commissary has long been considered the "Cornerstone of the Quality of Life". It is a most frequently visited site on most military installations, which makes it an ideal vehicle to deliver messages and other programs to military families. Federal Food Stamp and Women, Infant and Children (WIC) Program beneficiaries can buy almost one-third more food and nutrition in commissaries than is available from commercial sources, a fact complemented by program coordinators throughout the United States and overseas. Written agreements exist with all 46 State WIC coordinators and Electronic Foods Stamps administrators. The TRICARE partnership not only informs military families about eating healthier, controlling their weight and promoting concepts such as weight management and fitness, but also "financial fitness" through savings they obtain shopping the commissary. (DeCA Press Release 17-06, C-o-m-m-i-s-s-a-r-y spells healthy food at healthy savings, April 12, 2006.) DeCA is one of the largest employers of military spouses. Spouses of active duty military members make up over 38 percent of DeCA's workforce. Millions of commissary customers received the OneSource message printed on commissary grocery bags (DeCA Press Release 14-05, Commissaries assist in promoting awareness of Military OneSource, February 18, 2005).

Does the program use strong financial management practices?

Explanation: DeCA uses strong financial management controls and ensures there are no material internal control weaknesses. Accurate financial information is provided on demand and used for day-to-day management. Independent audits were performed on the FY 2001 Consolidated Financial Balance Sheets and the FY 2002 Financial Statements for the defense commissary program to test compliance with certain provisions of laws and regulations, exclusive of the Federal Financial Management Improvement Act of 1996 (FMFIA), and the Government Auditing Standards and OMB Bulletin Number 01-02, Audit Requirements for Federal Financial Statements. One area of concern is that the appropriated funds provided to fund the operation of DECA are mixed in with the sales receipts that are used to purchase groceries. By law the funds provided for commissary operations can only be used for commissary operations and sales receipts can only be used to purchase grocery stock. A better approach would be to establish a separate account for commissary operations similar to the surcharge account.

Evidence: DeCA received an unqualified opinion on the FY 2001 Consolidated Financial Balance Sheets and the FY 2002, 2003, 2004, and 2005 Financial Statements from the independent accounting firm of Klynveld Peat Marwick Goerdeler. The audits concluded that these statements are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America, and disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards, issued by the Comptroller General of the United States, and OMB Bulletin Number 01-02. DeCA tied with four other DoD components earning third place on its Annual Statement of Assurance Scorecard for fiscal year 2005. Of these, DeCA increased its score by two percentage points from the previous year earning congratulatory remarks from J. David Patterson, Principal Deputy, Office of the Under Secretary of Defense (Comptroller). The statement of assurance scorecard graded five categories: reporting timeliness, accuracy and completeness of the report, extent of component-wide program execution, training conducted, and weakness reporting, which measures both the extent of fully disclosing material weaknesses and promptly resolving previously reported weaknesses. DeCA's program has been distributed throughout DoD to be used as a "template" for other organizations to use.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: From its beginning in 1991, the Agency has demonstrated it possesses the governance attributes of a model governmental entity and has a strong internal control program to identify material weaknesses. The Agency has been recognized as a leader in the implementation of OMB Circular A-123, Appendix A. Appendix A of the circular provides a separate assurance statement concerning the internal control effectiveness over financial reporting and applies to the 24 Chief Financial Officers Act agencies. Material weaknesses formerly identified have been corrected and no open weaknesses exist today.

Evidence: The Agency has established a Senior Assessment Team, including the Chief Financial Executive, senior management, Chief Information Officer, and the Inspector General to implement OMB Circular A-123. They have produced narratives, flowcharts and risk assessments for DeCA's 19 key business processes; identified 87 control points for internal controls over financial report, none of which had a high control risk; and developed test plans to satisfy the OMB requirements that have been adopted as the standard test plan format for all of DoD.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: DeCA's Strategic Plan, former Performance Plans, and current Balanced Scorecard all contain long-term performance goals. DeCA has achieved ambitious targets to streamline the commissary system since its creation in 1991, but the current targets are only moderately ambitious. DeCA achieved these performance goals from FY 2001 through FY 2005. The Commissary Operating Board, representing all the military departments, ensures DeCA reports regularly on its progress in achieving program targets and producing results.

Evidence: Since October 1991, DeCA has reduced full time equivalent (FTS) staffing from 23,295 to 14,917 FTEs, a 36 percent reduction. Since 1994, DeCA has reduced military positions working at DeCA from 1,992 to 5, a 99.7 percent reduction. Since 1991, DeCA has reduced the number of commissaries from 412 to 268, a 35 percent reduction. In addition, DeCA has increased customer grocery savings from 23.2 percent in 1991 to 32 percent by 2005. DeCA increased customer savings from 30.4 percent in FY 2001 to 32 percent in FY 2005, with a corresponding increase in sales from $5,058.1M to $5,368.6M. [However, it is not clear how much this is due to effective purchasing by the commissaries and how much is attributable to changes in operating costs in the commercial grocery store business such as increased labor costs or taxes, which are not included in the price of groceries sold in the commissaries. Commissary operating costs are covered by annual appropriation and commissaries pay no taxes.] The outcome of exceeding savings and sales targets was an increase in the total compensation value generated by the commissary system. Over the same time, customer transactions increased from 93.7M to 94.4M, indicating an increase in the number of authorized patrons who use their commissary benefit. Sales and transactions performance from FY 2001 to FY2005 included recovery from declines attributed to increased security and installation access adjustments following the terrorist attacks of 2001. Commissary customer satisfaction measures showed steady increases from 2001 to 2005. The internal Commissary Customer Service Survey score increased from 4.33 in FY 2001 to 4.55 in FY 2005. DeCA's score in the external benchmark American Customer Satisfaction Index (ACSI) increased from 75 in 2002 to 77 for 2005. In 2005 the supermarket industry average ACSI score was 74, so DeCA outperformed several private sector supermarkets in customer satisfaction including Wal-Mart, Kroger, Safeway, Albertson's and Winn-Dixie. In addition, DeCA's strong customer satisfaction led to a below-average customer complaint rate recorded by the 2005 ACSI of 8 percent compared to an average supermarket industry rate of 14 percent. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005).

Does the program (including program partners) achieve its annual performance goals?

Explanation: DeCA's Strategic Plan, former Performance Plans, and current Balanced Scorecard all contain long-term performance goals with moderately ambitious targets through FY 2011. DeCA's goals, objectives and performance targets focus on people - the customers, workforce and partners - who work together to achieve annual efficiency and effectiveness goals and targets while preserving the value of the commissary benefit delivered.

Evidence: Actual customer savings exceeded the 30 percent target in FY 2003, FY 2004 and FY 2005. DeCA's principal partners in achieving these savings, manufacturers of grocery items, agree by contract to give the commissary their best prices. Actual sales also exceeded targets set for FY 2003, FY 2004 and FY 2005, attributable to DeCA meeting internal goals for its merchandising, marketing and outreach programs, industry partners meeting vendor support goals for in-store assistance, in-store merchandising and external marketing and, other government partners including the military exchanges meeting goals for cooperative marketing and outreach. In addition to customer savings and sales, since FY 2003 DeCA has met or exceeded targets for customer transactions, customer satisfaction, competitive sourcing, and audit results of financial statements. DeCA met targets or was within variance for a successful rating for surcharge obligations. The Agency is adjusting its facility condition index targets that have proven overly ambitious and unrealistic in light of the major changes in costs for construction and upkeep, and changes in the commissary facility inventory due to past and expected base closures. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today (TAB 18) than it was then ($1.018B in FY 2000 and $0.98B in FY 2005).

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The value of the benefit, as measured through customer satisfaction, savings to the patron on the goods they purchase and sales volume continue to rise. At the same time, program costs have remained relatively constant and when measured in constant FY 2000 dollars for the period of FY 2000 to 2006 have actually decreased. Using FY 2000 constant dollars, the cost to operate the commissary benefit is actually cheaper today than it was then ($1.018B in FY 2000 and $0.98B in FY 2005).

Evidence: Since 2000, customer purchase transactions increased from 93.7M to 94.4M, indicating an increase in the number of authorized patrons who use their commissary benefit. Sales and transactions performance from FY 2001 to FY2005 included recovery from declines attributed to increased security and installation access adjustments following the terrorist attacks of 2001. Commissary customer satisfaction measures showed steady increases from 2001 to 2005. The internal Commissary Customer Service Survey score increased from 4.33 in FY 2001 to 4.55 in FY 2005. DeCA's score in the external benchmark American Customer Satisfaction Index (ACSI) increased from 75 in 2002 to 77 for 2005. In 2005 the supermarket industry average ACSI score was 74, so DeCA outperformed several private sector supermarkets in customer satisfaction including Wal-Mart, Kroger, Safeway, Albertson's and Winn-Dixie.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Private sector grocery stores do not attempt to sell groceries at below market rates to DoD military, so they are not completely comparable to DoD commissaries. Nevertheless, commissaries are grocery stores. Comparisons are difficult since private sector grocery stores do not receive appropriations from the Congress, and they do have to pay Federal, State, and local taxes. That said, available private sector survey data indicates that the commissaries compare favorably to other grocery stores. DeCA scored 77 against an industry average of 74. Given its low prices, DeCA scores well in customer satisfaction and has a below-average complaint rate.

Evidence: Internal Commissary Customer Service Survey; American Customer Satisfaction Index (ASCI) conducted during calendar year 2005, released February 2006

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: While DoD can demonstrate that with a $1 billion plus subsidy, the commissary system can sell groceries at below market rates, it has not provided independent evaluations that this significantly impacts DoD's ability to recruit and retain a quality armed force that is ready to meet the challenges confronting this nation in the 21st century. GAO did a study in 1999 on factors influencing the retention of military service members in critical specialties. The commissary benefit was not one of the five most frequently selected reasons to stay in the military. Among quality of life factors it did rank above post exchanges and golf courses, but below fitness and sport activities. The DoD commissary program uses a variety of sources to provide independent information for evaluation of program effectiveness to validate results. DeCA employs the services of a qualified independent financial audit firm to "certify" its financial statements annually. In the critical performance metric of customer satisfaction, DeCA utilizes a jointly developed survey internal instrument (Commissary Customer Service Survey (CCSS)) to measure actual customer satisfaction across our patron base on an ongoing basis. DeCA also uses the external American Customer Satisfaction Index (ACSI) that is produced annually through a partnership of the University of Michigan Business School, the American Society for Quality, and the internal consulting firm Claes Fornell International (CFI) Group. The Defense Manpower Data Center provides independent assessments through their surveys of active duty, reserve, and retired personnel. As an example, DMDC's August 2005 Active Duty Survey indicates that 90 percent of Active-Duty members or family members have used the commissary in the past 12 months and 82 percent were satisfied or very satisfied with their commissary. In addition, DeCA is one of the few DoD components to receive a clean audit opinion of its financial statements, a truly exemplary achievement for a DoD component.

Evidence: GAO, Military Personnel: Perspectives of Surveyed Service Members in Retention Critical Specialties, August 1999, GAO/NSIAD-99-197BR. To date, DeCA has proven that the commissary program is effective and achieving results. Customer satisfaction surveys, done both internally and externally, show customer satisfaction increases. For the past four fiscal years, DeCA has achieved unqualified opinions on its financial statements by the independent accounting firm of Klyveld Peat Marwick Goerdeter (KPMG). KPMG concluded that DeCA's financial statements are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America, and disclose no instances of noncompliance that are required to be reported under Government Auditing Standards, issued by the Comptroller General of the United States, and OMB Bulletin Number 01-02. For 2005, DeCA tied with four other DoD components earning third place on its Annual Statement of Assurance Scorecard for fiscal year 2005. Of these, DeCA increased its score by two percentage points from the previous year earning congratulatory remarks from J. David Patterson, Principal Deputy, Office of the Under Secretary of Defense.