Background_and_General_Information.pdf

Background and General Information

DeCA operates a worldwide chain of 240 commissaries that provide groceries to military personnel, retirees and their families in 13 countries. Of their 15,000 employees, 65 percent are military related as spouses, family members, National Guard, retirees, or other veterans.

Because military families reside in countries around the world and in many remote and isolated locations, more than half of DeCA’s stores operate in those environments but account for only 20 percent of sales. Almost ninety million annual transactions yield $5.5 billion in annual at-cost sales across the entire commissary system.

Authorized patrons of the commissaries purchase items at cost plus a 5-percent surcharge and save an average of 30 percent on their purchases compared to commercial prices. This savings benefit makes DeCA a valued part of military compensation package, providing an important, non-pay, quality of life benefit and helping in recruitment and retention of service members. 10 United States Code Chapter 147 governs the activities of the commissary, outlining its existence and purpose, criteria for establishment and store closure, use of appropriated funds to cover operating expenses, merchandise that may be sold, surcharge and pricing, and overall operations.

$1.4 billion is appropriated annually to DeCA to pay for operating costs such as salaries, transportation, and contracts. Surcharge collections (from the 5 percent added at the register) total $300 million annually, and pay for store-level construction, maintenance/repair, equipment, including HVAC and refrigeration, and front end scanning systems. The Department is currently exploring ways to reduce the appropriated fund subsidy.

The Department recently began an exploration of commissary system privatization as a result of the requirement of the National Defense Authorization Act for Fiscal Year 2016. Based on the initial interest expressed by commercial entities, the Department is now issuing this RFI.

For the purpose of this RFI, the definitions of outsourcing and privatization are:

Outsourcing: The transfer of a support function, traditionally performed by an in-house organization to an outside service provider. Outsourcing occurs in both the public and private sectors. While the outsourcing firm or government organization continues to provide appropriate oversight, the vendor is typically granted extensive flexibility regarding how the work is performed. In successful outsourcing arrangements, the vendor utilized new technologies and business practices to improve service delivery and/or reduce support costs. Vendors are usually selected as a result of a competition among qualified bidders.

Privatization: A subset of outsourcing (or the transfer of a support function traditionally performed by a government organization to an outside service provider) which applies only to the public sector. Privatization actions may involve not only the contracting out of support functions, but also the transfer of facilities, equipment, and other government assets to private (i.e., non-Government) vendors. Government organizations often outsource support functions without privatizing public assets.

In assessing your business concern’s capability against the identified requirement, the following should be considered:

• The Defense Commissary System is a non-pay benefit that is administered by the DeCA on behalf of the Department and highly valued by the authorized patron base. The goals in privatizing any or all of this system are to maintain patron savings and service at a level consistent with an approved baseline and to simultaneously drawdown the Department’s performance of this non-traditional (i.e., non-military) mission and the fiscal burden on the taxpayer.

• The authorized patron base is specifically defined by law and policy; the predominance of this base is active duty military members, reservists and Guardsmen, retired military members, and their families.

• The value of these benefits is demonstrated by commissary usage between February 1, 2015, and January 31, 2016, encompassing over 88 million shopper visits to commissary stores. The DeCA implemented identification (ID) card scanning worldwide on January 9, 2014, fulfilling DoD requirements to validate commissary patronage.

• Usage based on categories of patrons by military service, status, and grade are depicted in the tables below (percentages may not add up to 100 percent due to rounding).

Commissary Usage (By Service, Status) Percentage of Transactions1

USA USAF USN USMC DoD5 Uniformed Services6 Other7 Total

Active Duty2 19.5% 16.2% 9.4% 4.8% 0.0% 0.5% 0.0% 50.4% Guard / Reserve

1.7% 1.7% 0.6% 0.2% 0.0% 0.0% 0.0% 4.2%

Retired3 13.0% 14.1% 9.3% 2.0% 0.0% 0.5% 0.0% 38.8% DoD 1.7% 0.8% 0.6% 0.2% 1.3% 0.0% 0.0% 4.6% Other4 1.0% 0.3% 0.2% 0.2% 0.0% 0.0% 0.3% 2.1% Total 36.9% 33.1% 20.1% 7.3% 1.3% 1.0% 0.3% 100.0% 1 Transactions for commissary eligible shoppers, including sponsors and dependents, at all commissaries 2 Includes Active Duty, Active Guard/Reserve (representing 2.4 percent of all transactions), and Cadets

3 Includes “Gray Area Retirees” (representing 1.6 percent of all transactions), who are reserve retirees not yet eligible for retired pay 4 Includes disabled veterans, foreign military, Medal of Honor recipients, others not classified as Active Duty, Guard or Reserve, Retired, or DoD

5 Includes DoD civil service employees, contract employees, NAF employees, and beneficiaries primarily in locations outside the United States 6 Includes members of the Coast Guard, US Public Health Service, and National Oceanic and Atmospheric Administration (NOAA) 7 Includes disabled veterans and other Government employees not classified as USA, USAF, USN, USMC, DoD, or Uniformed Services

Commissary Usage (By Rank, Service)

Percentage of Transactions1

USA USAF USN USMC DoD3 Uniformed Services4 Other5 Total

E1-E3 2.0% 2.0% 1.2% 0.8% 0.0% 0.0% 0.0% 6.1% E4-E6 14.3% 12.9% 8.4% 2.8% 0.0% 0.4% 0.0% 38.8% E7-E9 9.4% 10.1% 5.0% 1.8% 0.0% 0.2% 0.0% 26.5% W1-W3 1.1% 0.0% 0.1% 0.2% 0.0% 0.1% 0.0% 1.5% W4-W5 0.5% 0.0% 0.1% 0.1% 0.0% 0.0% 0.0% 0.7% O1-O3 2.2% 2.0% 1.2% 0.5% 0.0% 0.1% 0.0% 6.0% O4-O5 3.1% 3.3% 2.0% 0.6% 0.0% 0.1% 0.0% 9.1% O6 0.9% 0.8% 0.7% 0.1% 0.0% 0.1% 0.0% 2.5% O7+ 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% Other2 3.3% 1.9% 1.3% 0.4% 1.3% 0.0% 0.3% 8.6% Total 36.9% 33.1% 20.1% 7.3% 1.3% 1.0% 0.3% 100.0% 1 Transactions for commissary eligible shoppers, including sponsors and dependents, at all commissaries 2 Includes all ranks not specific to the military rank structure (e.g., General Schedule (GS), Wage Grade (WG))

3 Includes DoD civil service employees, contract employees, NAF employees, and beneficiaries primarily in locations outside the United States 4 Includes members of the Coast Guard, US Public Health Service, and National Oceanic and Atmospheric Administration (NOAA) 5 Includes disabled veterans and other Government employees not classified as USA, USAF, USN, USMC, DoD, or Uniformed Services

• The operating model of the commissary system is currently constrained by title 10, United States Code, Chapter 147. Proposals to change provisions of this legislation may be proffered by the Department, however, the process to enact change is not necessarily simple or quick.

The Department of Defense (DoD), Washington Headquarters Services (WHS), Acquisition Directorate (AD) is issuing this notice to request feedback from industry about its capability to perform the requirements in one of two contexts as follows, while maintaining the current (or a specified) level of authorized patron savings and service:

I. Full Commissary Support: Assumption of the full range of functions of and all stores within the current commissary system including, but not limited to, corporate and regional management, retail management and operations, sales, logistics, acquisition, finance, information technology, and human relations.

II. Partial Commissary Support: Assumption of one or more functional, operational, or organizational portions of the current commissary system, store locations, or a combination thereof.

The following task areas describe the broad range of functions in support of this effort:

I. Full Commissary Support Services Task Areas A. Store Operations: Processes, systems, and policies for day-to-day store operations and oversight including (but not limited to) store-based administration, facility management, inventory and category management (including receiving, stocking, placement, planograms, and resets), advertising and merchandising (including displays), financial management and accounting, information technology (e.g., point-of-sale systems), security, and customer service. This also includes operations that occur at a regional level.

B. Sales / Marketing / Merchandising / Public Relations: Management of sales and pricing. Marketing methodologies, such as promotion, advertising, telemarketing, selling, and retail management, for in-store and eCommerce avenues, as well as the associated customer analytics. Public relations and corporate communications.

i. Corporate (or Strategic) Communications

ii. Pricing

iii. Private Label

iv. Promotions

v. Analytics (e.g., Business, Product, Consumer)

vi. Web / eCommerce C. Production / Manufacturing: Development of private label product through research, marketing analysis, design, and engineering.

i. Private Label Management

D. Infrastructure Support:

i. Logistics: Includes management and operation of the Pacific and Europe

Central Distribution Centers (CDC) and the Meat Processing Plant as well as the coordination with US distributors. Manages the Defense Commissary System’s equipment, property, recycling programs, import documentation, customs, quarantine, import taxes, and health/safety inspections.

ii. Purchasing / Acquisition: Manages resale contracts, resale ordering agreements (ROA), resale services, equipment supplies, services, construction and architect-engineer services.

iii. Information Technology: Responsible for 24/7 operations worldwide to include operating systems and relevant business and management applications to include (but not limited to) those for point-of-sale;

ordering, receiving, and inventory; warehouse management, transportation, yard management, time and attendance, email, and financial management applications.

iv. Engineering: Designs, builds, and maintains all commissaries and CDCs, to include refrigeration and heating, ventilation, and air conditioning

(HVAC).

E. Finance: Financial planning and strategies for budgeting forecasting, bookkeeping, reporting, and tracking payables and receivables.

F. Human Resources / Labor Relations: Activities associated with recruiting, hiring, training, compensating, and dismissing personnel.

i. Health and Safety G. General Counsel / Legal

II. Partial Commissary Support Service Task Areas:

A. Privatize all corporate management (Section I, items B through G above) of the Defense Commissary System (excluding in-store management and operations)

B. Privatize specific subset(s) of stores (and provide “regional” or “zone” management) to encompass all functions outlined in Section I. Full Commissary Support Services Task Areas

i. Subset based on location

1. All commissaries within one or more specified continental US

(CONUS) regions (e.g., DeCA’s East, Central, West, and part of the Pacific Areas)

2. Only commissaries co-located with or proximate to your business concern’s existing stores or operations

3. All commissaries within the CONUS (including or excluding (as specified) those located in Alaska and Hawaii, but excluding other US territories)

4. All commissaries outside the CONUS (OCONUS), or all commissaries in one or more specific OCONUS regions (e.g., Europe)

ii. Subset based on sales

1. Largest stores by sales volume

2. Stores required by military necessity (regardless of sales volume)

iii. Subset based on size (e.g., supported customer base, square footage) C. Privatize specific subset(s) of functions outlined in Section I. Full Commissary

Support Services Task Areas, plus additional items noted below