From the desk of the ALA President

More election developments and impact.  Losses in the House are a setback for Democrat progressives who have sought to cut the defense budget. Defense budget cuts put pressure on all elements of DoD including appropriations that are used to support commissaries, exchanges and MWR programs. Control of the Senate looks like it might come down to two races in Georgia and these two races may not be decided until January 5.  In Georgia, if you don’t get above 50 percent of the vote, you have to go into a run-off election, and that election under Federal rules can’t take place until after nine-weeks to allow for overseas ballots to be returned.  There are two senate races up for grabs in Georgia.  None of the candidates in the Georgia Senate races appear to have more than 50 percent.

The uncertain outcome of the Senate puts into question two bills that are near and dear to the resale system—the FY 2021 NDAA and another pandemic Stimulus Bill.  The NDAA includes many provisions that affect resale including GAO reviews of DeCA operations and the data used by DoD to justify consolidation of resale programs.  The pandemic stimulus bill includes may include added funding to backfill losses for exchanges and MWR programs.

If the Senate stays Republican, The Senate Armed Services Committee would maintain its status quo with Senator Jim Inhofe (R.-Okla.) as Chairman and Senator Jack Reed (D-R.I.) as ranking member both of which won reelection as well.

Other SASC members who won re-election this cycle included Sens. Joni Ernst in Iowa, Tom Cotton in Arkansas, Mike Rounds in South Dakota, and Inhofe.   One that is still too close to call is Sen. Thom Tillis’s (R-N.C.).  Tillis is Chairman of the SASC’s Personnel Subcommittee which has jurisdiction over commissary and exchange matters.

Sen. Dan Sullivan (R-Alaska) won in his reelection.  Another advocate of military resale, family and quality of life issues, Senator Mark Warner (D-Va.) was re-elected.   Sen. Doug Jones (R-Ala.) lost his seat to Tommy Tuberville.   Democratic Sen. Jeanne Shaheen (D-N.H) kept her seat along with Gary Peters (D-Mich.).  Cotton chairs the airland subcommittee; Rounds chairs the cybersecurity subcommittee; Tillis chairs the personnel subcommittee; Sullivan chairs the readiness and management support subcommittee; Perdue chairs the seapower subcommittee; and Ernst chairs the emerging threats and capabilities subcommittee, with Peters as ranking member.

Also, if the Senate does not flip to the Democrats, there will be little or no change on Senate Appropriations with Richard Shelby (R-Ala.) remaining chairman of the full committee and the Defense Subcommittee and Richard Durbin (D-Ill.) as ranking member on both panels.

Todd Harrison, at the Center for Strategic and International Studies and a frequent speaker at ALA events, said another Republican Senate will likely push back on any sharp cuts to defense spending and force Democrats to negotiate for smaller gains in non-defense areas like health care and education.

Defense bill negotiations have been on-going at the staff level for months and the underbrush has been cleared with the remaining issues to be decided by the “Big 4”, Inhofe, Reed, Smith and Thornberry.  Thornberry retires in January and there is going to be a competition among HASC Republicans about who will take the ranking slot.  Jackie Speier (D-Calif.) is currently chairman of the HASC Personnel Subcommittee and Trent Kelly is ranking member.  They both won re-election.

On House Appropriations, Defense Subcommittee Peter Visclosky (D-Ind.) is retiring and his chairmanship is up in the air.  Kay Granger (D-Texas) and Sanford Bishop (D-Ga.) also won re-election.

Don Bacon (R-Neb.) who has frequently advocated for resale matters, won re-election as have Rob Wittman (R.-Va.) who was awarded the ALA’s Distinguished Service Award this year for his support of the military resale program and quality of life issues.   Other Virginia Representatives that were re-elected included Ben Cline, Morgan Griffith and Democratic Reps. Don Beyer, Elaine Luria, Jennifer Wexton, Gerry Connolly, Bobby Scott and Don McEachin.  Rep. Elissa Slotkin (D-Mich.) was also re-elected.   Ben Cline, Morgan Griffith and Democratic Reps. Don Beyer, Elaine Luria (who has been advocating to keep commissaries open during Government shutdowns), Jennifer Wexton (who included a provision in the Defense bill that requires extensive reporting by companies doing business with exchanges and commissaries on whether they are doing any business using materials made by forced labor in China), Gerry Connolly, Bobby Scott and Don McEachin.

More illumination on Flannery at DeCA.  We reported last month that Jim Flannery had taken a job at DeCA to be its Chief Transformation Officer.  Now, a DeCA press release is providing some more illumination.  Flannery is looking at multiple DeCA processes and is involved in “listening sessions” with major manufacturers and also has been in discussions with several other sectors up and down the supply chain.  The release says:

As DeCA’s CTO, Flannery advises DeCA leadership on innovative techniques to improve how DeCA delivers the commissary benefit to eligible patrons, including new business strategies to help DeCA take advantage of industry and consumer shopping pattern trends.

Flannery will also assist DeCA’s senior leadership on agency efforts to support the Defense Community Services’ Reforms, led by the Office of the Secretary of Defense Chief Management Office (OSD CMO), such as better partnering with the service-managed exchanges.

“I am personally very excited about the opportunity to enhance the way the commissaries deliver value to the men and women who serve our country around the world,” Flannery said. “And it is a bit of a way for me to give back. There has been an ongoing tradition of military service in my family. In a small and humble way, I hope I can contribute.”

Prior to DeCA, Flannery was the CEO of SummitVentures LLC, a consumer products consultancy he started in 2019 that focused on helping brands grow their business by building consumer and trading partner trust.

Before SummitVentures, he was senior executive vice president at the Grocery Manufacturers Association from 2013 to 2019. There, he was responsible for GMA’s overall “Member Value Creation” efforts and had primary responsibility for developing and implementing collaborative relationships, initiatives and programs with retailers and their trade associations across all retail channels.

At GMA, Flannery led the consumer products industry’s effort to improve the product recall process, standardize product code dating nomenclature to reduce food waste and developed and launched the SmartLabel® transparency initiative, which enables consumers to get access to information about hundreds of attributes on thousands of food, beverage, personal care, household product and pet care products.

During his 36-year career at P&G, Flannery served in various sales and management positions culminating with being managing director of customer development for P&G Global Operations. Prior to that position, he was director, Global Customer Marketing, from 1998 to 2003 and had responsibility for P&G’s industry-wide commercial collaboration efforts and the internal capabilities required to deliver them.  While at P&G, Flannery held volunteer leadership positions at GMA, the Food Marketing Institute, ECR-Australasia and ECR-Asia, and played an instrumental role in the creation of the Consumer Goods Forum. In 2010, he was the first manufacturing executive to be awarded the FMI “Friends of the Industry” Founders Award at this retailer’s Associations Annual Executive Conference.

AAFES’ Chief Chat to honor heroes.  The Army & Air Force Exchange Service and military resale are paying tribute to our Nation’s heroes. “Chief Chat,” the Exchange’s twice-a-week Facebook broadcast, is hosting Medal of Honor recipients, a Coast Guard Silver Lifesaving medal recipient during November. The “In Recognition Of” series is part of the first-ever joint military resale Veterans Day event to salute all who served and offer a chance to hear firsthand from our Nation’s heroes. “Chief Chat” is hosted by Air Force Chief Master Sgt. Kevin “KO” Osby, the Army & Air Force Exchange Service’s senior enlisted advisor.

Report find deficiencies in DoD’s reform efforts.  I get asked a lot about the efforts to consolidate the Department of Defense’s resale programs.  This consolidation is wrapped up in the overall Defense reform agenda—quite a complicated area.  For those of you tracking these things, here is a development that will affect this reform.   The Government Accountability Office just issued a report that will have implications on the effort to consolidate resale programs of the Department of Defense.  This consolidation is part of an overall review of Defense management that is being undertaken by the Department’s Chief Management Officer and the Reform Management Group (a panel of representatives from the branches of the Armed Services and other Defense entities).    Congress has been questioning the data used to justify the consolidation or “Community Reform” effort at DoD.  The report was performed by Elizabeth Field’s group over at GAO.  ALA has met with her and her team on Defense resale reform matters and is scheduling a meeting to meet with them on their latest project that is expected to be assigned to GAO upon completion of the negotiations over the fiscal year 2021 National Defense Authorization Act that is expected to be completed this month barring some political intervention due to the election.  Also, DeCA is affected by cuts to Defense agencies that are associated with the reform effort and reportedly are getting hit with a 6 percent cut emanating from the reform effort.

The November 2020 GAO report says: “The Department of Defense (DOD) has made progress in establishing valid and reliable cost baselines for its enterprise business operations and has additional efforts ongoing. DOD officials told GAO they have developed and are continuing to refine baselines for all of the department’s enterprise business operations, such as financial and human resource management, to enable DOD to better track the resources devoted to these operations and the progress of reform. While still in progress, this effort shows promise in addressing the weaknesses in DOD’s section 921 report and in meeting the need for consistent baselines for DOD’s reform efforts that GAO has previously identified.”

GAO found that DOD’s reported savings of $37 billion from its reform efforts and a Defense-Wide Review to better align resources are largely reflected in its budget materials; however, the savings were not always well documented or consistent with the department’s definitions of reform. Specifically:

  • DOD had limited information on the analysis underlying its savings estimates, including (1) economic assumptions, (2) alternative options, and (3) any costs of taking the actions to realize savings, such as opportunity costs. Therefore, GAO was unable to determine the quality of the analysis that led to DOD’s savings decisions.
  • Further, some of the cost savings initiatives were not clearly aligned with DOD’s definitions of reform, and thus DOD may have overstated savings that came from its reform efforts rather than other sources of savings, like cost avoidance. For example, one initiative was based on the delay of military construction projects. According to DOD officials, this was done to fund higher priorities. But if a delayed project is still planned, the costs will likely be realized in a future year. 

Prior to February 2018, the Deputy Chief Management Officer led DOD’s department- wide reform efforts. The CMO assumed these responsibilities effective February 1, 2018, in accordance with section 910 of the NDAA for Fiscal Year 2018, which disestablished the position of the Deputy Chief Management Officer and established the CMO position as a presidentially appointed, Senate-confirmed position.

The 20 DOD defense agencies and eight DOD field activities (including DeCA) are separate from the military departments. These defense organizations are intended to provide a common supply or service across more than one DOD organization, including support for the department’s business operations, and they include the Defense Finance and Accounting Service, Defense Human Resource Activity, Defense Information Systems Agency, and Defense Logistics Agency.

The RMG is the governance forum for the department’s business reform efforts and is responsible for implementing the National Defense Strategy’s third line of effort to reform the business functions of the department. The RMG is a deliberative body with the authority to make decisions affecting the department’s business functions. The RMG is chaired by the CMO and includes participation by, among others, the Under Secretary of Defense (Comptroller), Director of Cost Assessment and Program Evaluation, and Under Secretaries of the military departments.

CMO position is uncertain. “Despite general adherence to many of the leading practices, there is a risk that this collaboration on reform efforts may not be sustained in light of any organizational changes that Congress or DOD may make. The status of the CMO position currently faces significant uncertainty. Section 904 of the NDAA for Fiscal Year 2020 required DOD to conduct two assessments of the CMO position, including one by an independent entity such as the Defense Business Board. The conference report accompanying the bill also stated that it was the conferees’ intention to disestablish the CMO position pending the assessments required by section 904.  In response, the Defense Business Board assessed that the CMO has been mostly ineffective in executing its mission to transform business operations in DOD, and in exercising its statutory responsibilities and authorities, in part because the position was not set up for success. Specifically, the Defense Business Board determined that there were (1) misalignment between the functions assigned by the congressional statutes and the functions actually assigned to the CMO organization; (2) difficulties in exercising authorities over military services and defense agencies and DOD field activities; (3) chronic vacancies in the CMO and/or DCMO position since 2008; and (4) assignment of additional duties that have nothing to do with business transformation. The Board also presented alternatives for disestablishing and for replacing the CMO position. Both the Senate’s and the House of Representatives’ bills for the NDAA for Fiscal Year 2021, as passed by each chamber, would terminate the CMO position and reassign statutory responsibilities and duties to other DOD officials.

“Our prior reports have identified cases in which leadership changed—or was briefly absent—and, accordingly, an interagency collaborative mechanism either disappeared or became less useful.  Our prior work has also found that organizational changes can occur over several years, and must be carefully and closely managed.  The risk that collaborative mechanisms would become less useful for DOD’s reform efforts is increased by the fact that OCMO, Office of the Under Secretary of Defense (Comptroller), and CAPE have not formalized and institutionalized these efforts. Specifically, there are no written policies or formal agreements that define how organizations should collaborate with regard to DOD’s reform and efficiency efforts. As a result, there is also a risk that leadership for reform efforts will not be sustained in light of any organizational changes that may occur,” the report said.

GAO overturns household goods contract award.  For the first time, USTRANSCOM is seeking a contractor to perform household goods relocation services now performed by the government.  This contractor would provide all personnel, supervision, training, licenses, permits and equipment necessary to perform household goods relocation transportation and storage-in-transit (SIT) warehouse services worldwide.   GAO sustained the challenges to the agency’s responsibility determination citing the conduct of discussions, the conduct and the documentation of oral presentations, the evaluation of technical capability proposals, and the best-value tradeoff analysis.  GAO recommended that the agency conduct and properly document a new round of oral presentations and include in that record documentation of the discussions conducted with each offeror.

Retailers rely on November and December for at least 20% of annual revenue include electronics, clothing, department and jewelry stores, according to data from the U.S. Census Bureau. In particular, for jewelry stores, the two months alone accounted for 27.5% of 2019 revenue.  In discretionary categories like these, retailers have already experienced steep revenue losses this year. Local businesses selling jewelry, luggage and leather goods lost 46% of revenue since March compared with a year earlier, while clothing stores lost 35%, according to data from Womply, a local commerce platform. While these small businesses aren’t represented in the stock market, the people they employ and the space they rent lend vital support to local economies.  Already, local businesses selling discretionary goods have ceded share to large competitors with better e-commerce operations.  The compounding effect of a Covid-19 second wave and no government intervention seems likely to push many already vulnerable stores over the edge.

Commercial curbside update.  Supermarkets are using pandemic-driven changes in shopping behavior to accelerate the shift to e-commerce they have been seeking but have been slow to realize in recent years.  Grocers are now devoting more of their floor space to fulfill digital orders in response to customers’ increased food consumption at home and their growing reliance on online shopping.

Albertsons is testing the use of dozens of 9-by-12-foot temperature-controlled lockers in select stores in Chicago and California for customers to collect what they buy online. It is also introducing contactless payment in all of its more than 2,200 stores.  Kroger has more than 2,100 pickup locations.

 

While many such technology investments were under way in the industry before the health crisis, food retailers are now making bigger and faster bets in hopes of appealing to consumers who want to avoid shopping in person or at least reduce the number of visits. Online grocery sales in August were up about 74% from a year earlier, according to data provider Nielsen.The jump in digital sales is also creating new challenges, however.  Industry executives say online purchases are less profitable than those made in-store because of the extra costs associated with fulfilling orders for customers. Grocers have to pay their own staff to pick and package items on shoppers’ behalf.Delivering groceries to consumers is more expensive than having people pick them up because of the labor and transportation required, said Bill Bishop, co-founder of the consulting firm Brick Meets Click. Compared to pickup, delivery typically adds $8 per order to retailers’ costs, he said. Lowering costs “is viewed as the only way to move the online business to profitability,” he said.

Retail essential worker information.    Since the onset of the pandemic, ALA has been tracking the Critical Infrastructure guidance coming out of government and providing information to suppliers on how this guidance affects their operations and ability to move products.

 

The retail industry is a major employer in the United States, accounting for nearly 1 in 10 of all domestic workers. While salespersons, cashiers, stock clerks and first-line supervisors in brick-and-mortar stores are primary examples of retail workers, those involved in the facilitation and execution of e-commerce, such as delivery drivers and warehouse packers, are a growing segment of the sector’s work.  Research shows that four occupations comprise the bulk of the industry, constituting roughly 79% of all retail worker employment: retail salespersons (about 25%), drivers and sales workers (24%), cashiers (20%), and stock clerks and order fillers (11%). The retail workforce consists primarily of full-time employees (roughly two-thirds of the labor force) who work for companies with more than 1,000 employees. Walmart is the country’s largest private-sector employer, employing 10% of all retail workers.

 

Demographically, 40% of retail workers are women, although the gender distribution varies widely by occupation within the sector. Cashiers, who earn an average of $8.25 per hour, are predominantly women, whereas delivery drivers, who earn an average of $16.20, are predominantly men. The median retail worker age is 40, with 28% of workers reporting educational attainment beyond a high school diploma. The racial makeup of the retail sector mirrors that of the overall workforce: 62% non-Hispanic white, 17% Hispanic, 13% African American and 5% Asian.

The retail industry is composed of a complex network of occupations working in concert to meet the everyday needs of people across the country. From keeping grocery store shelves stocked to delivering consumer goods, many occupations within retail are deemed essential due to the role they play in maintaining everything from food to personal security. For this reason, all states with available guidance have deemed occupations within the retail sector essential. Workers in the following settings have most commonly been deemed essential across the states: grocery stores, pharmacies, medical supply stores, convenience stores, pet stores, hardware stores, office supply stores and liquor stores. Since the majority of retail occupations cannot be done remotely, many essential retail employees have continued carrying out their work in person. This has sparked debate around worker protections as retail workers, who are often low-wage earners with limited benefits, such as grocery store clerks, face risks to exposure daily.

All states with available guidance have deemed occupations within the retail sector essential. However, essential retail occupations vary based on state.  Colorado and at least six other states deemed medical and/or recreational cannabis dispensaries essential. All but five states—-New York, Massachusetts, Washington, New Mexico and Vermont—deemed firearms stores nonessential.

At least 20 states have adopted federal guidance from the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency on essential workers. The guidance outlines the following retail workers, among others, as essential:

  • Workers supporting groceries, pharmacies, convenience stores and other retail (including unattended and vending) that sell human food, animal and pet food and pet supply, and beverage products. They include retail customer support service and information technology support staff necessary for online orders, pickup and delivery.
  • Restaurant carry-out and quick-serve food operations, including dark kitchen and food prep centers, carry-out and delivery food workers.
  • Workers and firms supporting the distribution of food, feed, beverage and ingredients used in these products, including warehouse workers, vendor-managed inventory controllers and blockchain managers.

Want to know how retailers are handling the pandemic?  Here’s a source: National Conference of State Legislatures https://www.ncsl.org/research/labor-and-employment/covid-19-essential-workers-in-the-states.aspx

CMMC rolling forward.  ALA has been participating in policy discussions with Department of Defense representatives on a wide range of topics affecting industry.  One is the CMMC or Cybersecurity Maturity Model Certification program.  The Defense official in charge of rolling out the department’s Cybersecurity Maturity Model Certification program that will required all government contractors to certify controls over their cyber processes.

Katie Arrington, the person taking the lead in DoD on this program said at a conference attended by ALA that sit might be necessary to revise the standard to address high costs associated with validating procurements at the very top of its tiered model.

“There’s a lot of discussion I think yet to be had on level four and five,” Katie Arrington, the DOD’s CMMC lead, said. “Is it all the controls in level four? Or is it a you know, à la carte that you need to be able to meet 50% of the controls in level four, to get certification? Because it’s very expensive. And is there the [return on investment] on implementing all those controls?  Do we need to modify the CMMC?”

The CMMC program aims to replace a system of accepting contractor testimonials on its cybersecurity controls.  . Public comments are due at the end of November on an interim CMMC rule that will take effect on Dec. 1.

Best regards,

Stephen Rossetti

President

Posted in .

Leave a Reply

Your email address will not be published. Required fields are marked *