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DoD Forming Plan to Consolidate Exchange Systems

By Jim Garamone
American Forces Press Service

WASHINGTON, May 20, 2003 – DoD is working on a plan to consolidate the service exchanges under one roof, said Charles Abell, principal deputy undersecretary of defense for personnel and readiness.

Congress must approve any move to merge the Army and Air Forces Exchange Service, the Navy Exchange and the Marine Corps Exchange. Provided the legislators give the go-ahead, Abell said it will still be "some years" down the road before the move occurs.

"We may be looking at a five-year process here," he said. "It may be less if we're more aggressive, and we're going to do it very carefully."

Abell said DoD will be sensitive to the stakeholders in the process. "We're going to listen to a lot of people," he said. "The whole goal here is to make it better at the end, and if we can't do that, then we won't do this."

Retired Air Force Maj. Gen. C.J. Wax is developing the plan for a united exchange service. Wax is the former commander of AAFES the largest exchange service with about 52,000 employees. It is a $7.5 billion retail, food and services business that operates about 12,000 facilities in 29 countries and 50 states. .

The Navy Exchange Service Command is headquartered in Virginia Beach, Va., and employs over 16,000 people in more than 100 locations worldwide. The Marine Corps Exchange with sales of $645 million is the smallest system with a workforce of about 4,000.

DoD has discussed consolidating the exchanges in the past. Abell said that high-level support for the proposal will work toward it actually happening.

"Secretary Rumsfeld is an advocate for transformation," he said. "He implores us to be bold rather than timid. This is something that makes sense to me, and it makes sense to a lot of other people as well."

One aspect officials hope will improve under the consolidation is the dividend the exchanges return to the services' morale welfare and recreation funds.

According to the AAFES Web site information, for example, MWR-type programs received $243.9 million in fiscal 2001, which was distributed as follows: Army, $145.4 million; Air Force, $86.4 million; Marine Corps, $10.2 million; and Navy, $1.7 million. That per capita dividend translated into $277.94 for every soldier and airman.

"(The dividend) has gone down over the last four or five years," Abell said. "We've got to do something to arrest that. This is a way to save costs and thus improve our dividend."

Abell said a consolidation will "be transparent" to exchange workers and shoppers. "Marines are still going to go to a Marine Exchange, sailors are still going to go in to a Navy Exchange, and airmen go into a BX and soldiers go into a PX," he said. "What we're changing is the 'back room' things and the management above the store level."

He said shoppers should see improved service, availability, variety and the ultimate result of better dividends.

Consolidating the infrastructure above store level means the system could cut down on duplication. "I don't need three people doing the same thing -- there will be economies of scale there," he said. "We don't need three trucks driving up and down (Interstate) 95 one for the Marine Exchange, one from the Army-Air Force Exchange, one from the Navy Exchange going past each others' bases. We could have fewer trucks stopping at each base."

Another savings could come from a consolidated information technology system and fewer accountants, comptrollers and chief executive officers.

Store employees do not have to worry about their jobs. "If it takes a certain number of people to run the exchange at one base, it's probably going to take the same number of people to run that exchange after consolidation," he said. "If you work at the exchange, if you shop at the exchange, you should not see any difference."

Abell said there is no target figure for savings. "It's not about saving money," he said. "It's about improving the dividend to the MWR accounts to all the services. There's not much appropriated dollars at play here at all.

"This is a nonappropriated activity. It buys its goods and services with nonappropriated funds. It pays its people with nonappropriated funds, and it supplies the dividend back as nonappropriated funds. So, I'm not looking for savings here; I'm looking for benefit."

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