By law, DOD’s primary consideration for establishing and closing commissaries is the needs of the members of the armed forces on active duty and their dependents. DOD Instruction 1330.17 outlines requirements for establishing and closing commissaries. Under the instruction, DOD can establish commissaries only where (1) the location has a military mission and a minimum active-duty population of at least 500 active, reserve, or National Guard personnel and (2) the location is part of DOD’s real property inventory. For commissaries in locations that DOD considers to be remote and isolated, the Assistant Secretary of Defense (Readiness and Force Management) may grant an exception from the requirement to have a minimum active-duty population of 500 personnel. DOD Instruction 1015.10, which defines remote and isolated, lists factors to establish and maintain a location’s remote and isolated status, which must be documented and updated if circumstances change substantially. According to DeCA, as of April 2016, there were 29 commissaries that are located in remote and isolated areas. DOD’s instruction also provides specific requirements for closing commissaries, including if the location (1) no longer is managed as part of DOD’s real property inventory, such as if the site is closed under a Base Realignment and Closure round recommendation and (2) no longer has a military mission or an active-duty population—specifically if there are not at least 100 active, reserve, or National Guard personnel on active duty permanently assigned to the installation or location. We have previously reported on DOD’s commissary operations as well as other privatization efforts within the department. For example, in November 2016, we reported that DOD’s budget neutrality report for the commissaries and exchanges did not include any assumptions, methodology, or specific time frames related to cost savings initiatives totaling $2 billion in reductions over a 5-year period from fiscal year 2017 through fiscal year 2021. We also found that DOD’s report did not define specific metrics for benchmarks for customer satisfaction, quality of products, and patron savings. We recommended that DOD provide information to Congress to support the department’s conclusion about budget neutrality, develop a plan for achieving alternative reductions to appropriations, and identify specific metrics for customer satisfaction, quality of products, and patron savings. DOD concurred with our recommendations. In April 2011, we reported that some of the general and economic criteria in DOD’s instruction were not clear on when to establish or continue a commissary versus when to discontinue commissary operations at Naval Air Station Brunswick, Maine. For example, DOD’s instruction stated that the primary consideration in assessing the need for a commissary and selecting the location of the store—including whether to operate commissaries on closed installations—is the effect on active-duty personnel and their dependents. However, the instruction did not specify how this effect should be measured and used as decision criteria. Additionally, at the time of our review, the instruction stated that “as a general rule, commissary operations are discontinued when an installation is completely closed and no active-duty or reserve component personnel remain on the installation.” However, we found that it was unclear what conditions would warrant an exception to the general rule and how the general rule relates to the other criteria for closing a commissary. As a result, we recommended that DOD revise and clarify its guidance. DOD concurred with and implemented our recommendation. In July 2010, we reported that the Army experienced challenges with its efforts to privatize its lodging facilities. Specifically, the Army pursued privatization to obtain private-sector financing in order to address poor conditions of its facilities. We made recommendations related to the Army needing to assess the costs and benefits of future privatization efforts and to the need for DOD to incorporate lessons learned in future privatization efforts within the department. DOD concurred and implemented our recommendations. DeCA is required by law to use appropriated funds to cover commissary operating costs, which subsidizes the price of groceries and household goods for patrons shopping at commissaries. In fiscal year 2015, DeCA received $1.3 billion in appropriations. DeCA also is governed by regulations that may limit its ability to control costs and allocate funds in the same way as commercial grocery stores, which do not operate under such regulatory requirements. For example, under law, DeCA employees are subject to civil service rules, including the General Schedule pay scales and Office of Personnel Management regulations on personnel policies such as hiring, pay, and retention, but that are not sensitive to local market conditions such as local labor costs as would be true for a commercial grocery store. Figure 1 shows how DeCA allocated $1.3 billion in appropriated funds by labor and non-labor operating costs in fiscal year 2015. When DOD established DeCA in 1991, it consolidated the management of separate grocery stores run by the Army, the Air Force, the Navy, and the Marine Corps. According to DeCA officials, the consolidation helped reduce costs by combining buying power and sharing overhead. In recent years, several studies reviewed the potential impact of employing business concepts normally used in commercial grocery stores, such as variable pricing and improvements in product management, in commissary operations. For example, in 2015 the Military Compensation and Retirement Modernization Commission (Military Commission) and Boston Consulting Group both recommended ways to reduce annual appropriated funds of commissaries by implementing private business concepts. Specifically, the Military Commission recommended several operational efficiencies, including consolidating commissaries with exchanges, which are retail stores not funded with appropriations and comprise a mix of department stores; convenience stores; and fast food outlets, among others, and are managed by each of the military services. The Boston Consulting Group made recommendations related to employing variable pricing and to product management. DOD has a methodology to calculate the patron savings rate at commissaries, but lacks reasonable assurance that it is maintaining its desired savings rate for patrons because of weaknesses in this methodology. DeCA’s Board of Directors annually recommends the patron savings rate that is to be the price differential commissary patrons are to obtain by shopping in commissaries rather than at commercial grocery stores. Based on past calculations of the savings rate, the Board recommended a desired average savings rate of 30 percent for fiscal year 2015. DeCA’s methodology for calculating savings uses weighted averages of product prices. However, aspects of DeCA’s methodology are not consistent with leading practices for cost estimating and sampling. As a result of these weaknesses, DeCA lacks reasonable assurance that the desired 30 percent rate recommended by the Board reflects the actual experience of commissary patrons. DeCA uses weighted averages of product prices to calculate the savings rate, and DeCA’s methodology differs for commissaries in the continental United States and for those in Hawaii, Alaska, and overseas. For commissaries in the continental United States, DeCA divides products into seven categories ranging from fresh meat and produce to nonfood items with universal product codes (i.e., bar codes). For products with bar codes, DeCA compares commissary and commercial prices for over 38,000 items. Specifically, it compares prices on commissary items during the first 6 months of the calendar year with average national product prices provided by a leading survey. For products lacking a bar code, DeCA conducts physical audits at local commercial grocery stores with similar products for a selected sample of 30 commissaries. For the meat and produce samples, DeCA collects price data annually in August and September. The seven categories’ prices are weighted using a consumer expenditure survey published by the Bureau of Labor Statistics. For commissaries in Alaska, Hawaii, and overseas, DeCA calculates the weighted average of savings for a selected sample of commissaries based on savings by total sales in each geographic region. DeCA physically collects prices for about 200 items across the same seven product categories from a sample of commissaries in Alaska and Hawaii. At other overseas commissaries, DeCA conducts more limited sampling from 13 commissaries. As shown in table 1, DeCA’s calculation of the savings rate varies by geographic region. When compared with leading practices for cost estimating and sampling, DeCA’s savings calculation methodology has several weaknesses that could lead to an inaccurate calculation of the actual savings rate that commissary patrons experience. According to leading practices and federal standards for internal control, management should have relevant and reliable information to run its operations and the data should be reasonably free of error and bias and represent what they were purported to represent. However, our analysis showed that DeCA’s methodology for determining the savings rate is not fully consistent with leading practices in five areas. As a result, DeCA lacks reasonable assurance that patrons are receiving the full desired value of the nonpay cash benefit represented by the 30 percent savings rate approved by the Board of Directors. Seasonal sales prices: DeCA’s methodology does not account for seasonal differences in prices. DeCA collects its product price samples during the first 6 months of the calendar year for categories, such as dairy, grocery food, frozen, and health and beauty products in the continental United States, which is not representative of the whole year and omits potentially reduced prices commercial grocery stores may offer during the winter holidays. DeCA officials acknowledged that they do not account for winter holiday season price fluctuation, but stated that 6 months is a sufficient period of time for the sample. However, according to nonprobability sampling standards published by the American Association for Public Opinion Research, this type of omission creates a coverage error by underrepresenting part of the sample and generates potential bias. By limiting data collection to the first 6 months of the year, DeCA lacks reasonable assurance that its methodology results in an accurate comparison between commissary and commercial prices over the full year. Sampling overseas commissaries: While DeCA employs a methodology for randomly selecting 30 commissaries in the continental United States in its savings market basket analysis, the agency lacks a similar methodology for selecting overseas commissaries.