A cost analysis of direct cash compensation in lieu of operating military commissary stores

Abstract

The Defense Commissary Agency (DeCA) provides groceries at cost (cost consists of the purchase price, a 1 percent markup on select grocery items to cover the cost of inventory loss during normal operations, and the cost of transportation to the store, not including overseas transportation) plus a 5 percent surcharge to military families worldwide. DeCA relies on appropriated funding to operate, and significant budget cuts by the Department of Defense threaten the current operation model. This thesis will evaluate whether direct cash compensation to service members would reduce costs to the DOD while still providing the current benefit that DeCA provides them. This thesis will also provide an estimate of the monetary value of the commissary benefit to service members and the monetary value of the commissary benefit in remote locations. The research will incorporate data extracted from financial statements from DeCA and from military demographic data. This thesis finds that it would be less expensive over time to continue operating the commissary system as is, rather than offer direct cash compensation to military service members for at least the next twenty years.