The Defense Commissary Agency

1. The Defense Commissary Agency Director's Update February 14, 2007 Mr. Patrick B. Nixon Director & CEO

2. Scope of Operations FY 2005FY 2006 • DeCA • Regional offices • Commissaries • Country locations • Central distribution centers (CDC) • Central Meat Processing Plant 4 3 268 263 14 13 10 10 1 1 FY 2005FY 2006 • DeCA workforce • Military • End strength • Family members • Local nationals • CIV FTEs executed 5 10 17,817 18,023 38% 38% 2,119 2,094 15,058 14,904

3. Funding Reductions • FY 2007 • $5.5M reduction per OSD for efficiencies • $25.5M reduction per OSD for Defense-wide offset • $4.4M COB approved reductions • $17.1M foreign currency fluctuation • FY 2008 - FY 2013 • BRAC, overseas restationing, reengineering, and other cost savings initiatives are reflected in the current budget

4. Capital Investment Summary Facilities & Improvements Equipment Information Technology** Total FY 2006 $122M $25M $90M $237M FY 2007 $260M* $21M $80M $361M FY 2008 $205M $24M $50M $279M • * 4 major construction projects rolled over into FY 2007 • ** Commissary Advanced Resale Transaction System (CARTS) begins deployment in February 2007 – • completion date 2008

5. Internal Controls • Revised OMB Circular A-123, Appendix A requires agencies to report on the effectiveness of their internal controls over financial reporting • Accomplishments • Highest score in DoD on the FY 2006 Annual Statement of Assurance Scorecard • OSD(C) referring DoD Components to DeCA as the model for implementation • Internal Control efforts contributed significantly to the fifth consecutive “clean” audit opinion on financial statement DeCA Leading the Way on Internal Controls in DoD

6. Customer Initiatives • Increasing the value of the benefit without increasing the cost • Implemented Health & Wellness • Dietitian onboard to promote Health and Wellness initiatives • Expanded Natural & Organic food • Expanded Virtual Commissary • Improved product availability • Assumed produce procurement mission Sales Continue to Increase

7. Supporting the Families • Commissary gift certificates • Nearly $11M gift certificates purchased to date • More than $200K donated by Industry, military, and general public to charities assisting military families including • Operation Homefront, USO, Air Force Aid Society and Fisher House Foundation • Scholarships for Military Children • Nearly 3,000 students assisted • More than $5M since 2001 • Increased public donations seen in FY 2006 • FY 2007 scholarships close February 21, 2007 • Pre-deployment and welcome back activities for troops • Commissaries/vendors actively participate locally

8. Produce Procurement • Program coordinated with Industry and DSC-P • Contracts awarded for all CONUS locations, plus Alaska, Hawaii, Puerto Rico, and Cuba • NE protest has delayed performance by contractor • Solicitations to follow for coverage in Pacific and European locations • DSC-P support will continue until conversion completed • Results extremely positive • Improved quality • Increased savings • Increased organics Double Digit Produce Sales Growth

9. BRAC - Store Level • Impact of closing locations: (BRAC 2005) • Commissaries affected: 6 Stores • Fort Monmouth, NJ • Fort McPherson, GA • Fort Gillem, GA • CE Kelly Support Center, PA • NSCS Athens, GA • NAS Brunswick, ME • FY 2006 Sales: $65.5M • FY 2006 Surcharge: $3.3M • Depreciated value of assets: $9.1M • Employee authorizations: 195

10. BRAC - Above Store Level • BRAC legislation approves a building addition to DeCA HQ, Fort Lee • Project contract award 1st qtr FY 2008 • Eliminates leased facilities • Complies with DoD’s Force Protection Standards • Transfer DeCA’s Human Resources Operations Division (HROD) to DLA in FY 2008-2009 • Dependent on conversion date to NSPS • Challenges • Business processes • Funding

11. OIGPBS/BRAC Facility Impacts • Overseas Integrated Global Presence Basing Strategy (OIGPBS) Gaining Location • 6 locations impacted: Ramstein, Spangdahlem, Ansbach, Wiesbaden, Vilseck, Vicenza • Total cost $92.9M • Base Realignment and Closure (BRAC) Gaining Location • 10 locations impacted: Ft Bliss, Ft Riley, China Lake, Ft Benning, Ft Carson, Ft Lee, NS Norfolk, Ft Sam Houston, Moody AFB, Ft Belvoir • Total cost $178.9M Lack of appropriated fund support has forced DeCA to reprioritize short, intermediate and long range major construction programs to accommodate unfunded requirements

12. Disruptive Labor Relations • If you want to complicate your life… • Don’t read or follow the Collective Bargaining Agreement • Don’t call the Labor Specialist (Chateara Seymour) for advice when faced with a labor issue • Don’t invite the union to participate in formal discussions with bargaining unit employees • Don’t return the Union reps phone calls—keep them in the dark and close off all lines of communication Cooperation & Communication = Good Business!

13. Cooperative Ventures • Past efforts focused on combining processes • Most successful – Joint construction program & implementation of open architecture/IT standards. • Most problematic – differing APF vs. NAF rules • Current efforts focused on exploring opportunities that could strengthen the military resale system • Many would require OSD approval or Congressional notification/action • Key charters • Joint sales events • Brand named concessions within commissaries (e.g., Starbucks) • Selling exchange items in commissaries • Shared contracting opportunities • Universal gift card • Sharing distribution systems • Use of on-line mediums, catalog, and direct mailing to communicate benefit information and advertise promotional events • Homestead

14. Countdown: Naval Base San Diego

15. Questions