Defense Infrastructure: Commissary Reorganization Should Produce 
Savings but Opportunities May Exist for More (26-APR-01,	 
GAO-01-473).							 
								 
In July 2000, the Defense Commissary Agency proposed changes to  
its regional management structure that it expects will generate  
savings, improve efficiencies, and provide more effective	 
management of commissary operations. The plan calls for 	 
eliminating the two area offices within the Eastern Region and	 
consolidating most of the Eastern Region's operations at the	 
region's headquarters at Virginia Beach, Virginia. While the	 
Agency has not fully refined its cost and savings estimates, it  
appears that, by eliminating the Eastern Region's area offices	 
and consolidating those regional operations at its Virginia Beach
location, the Agency will produce savings and improve operations.
However, with the implementation of the plan comes a loss of	 
operational expertise in the closing offices that could 	 
potentially disrupt operations and customer service. Whether the 
Agency's proposed regional reorganization is the best approach	 
for achieving efficiencies is unclear because the Agency did not 
assess alternative structural approaches to improving regional	 
operations and creating efficiencies. The plan is limited because
it considers only the Eastern Region and not the totality of the 
regional structure, which is to be considered in the Agency's	 
follow-on study of the current reorganization plan. While the	 
closure of the area offices is likely to improve efficiency, the 
planned study to determine the optimum number of stores for the  
Agency's regions provides an additional opportunity for achieving
additional streamlining and improved regional operations and	 
efficiencies. In this regard, experience from commercial-sector  
retailers may provide useful insights into determining how to	 
shape the Agency's future regional structure.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-473 					        
    ACCNO:   A00913						        
  TITLE:     Defense Infrastructure: Commissary Reorganization Should 
             Produce Savings but Opportunities May Exist for More             
     DATE:   04/26/2001 
  SUBJECT:   Defense cost control				 
	     Facility management				 
	     Financial management				 
	     Personnel management				 
	     Cost effectiveness analysis			 
	     Federal agency reorganization			 
	     Military downsizing				 
	     Reductions in force				 

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GAO-01-473

Report to the Special Oversight Panel on Morale, Welfare, and Recreation,
Committee on Armed Services, House of Representatives

United States General Accounting Office

GAO

April 2001 DEFENSE INFRASTRUCTURE Commissary Reorganization Should Produce
Savings but Opportunities May Exist for More

GAO- 01- 473

Page 1 GAO- 01- 473 Defense Infrastructure

April 26, 2001 The Honorable Roscoe G. Bartlett Chairman The Honorable
Robert A. Underwood Ranking Minority Member Special Oversight Panel on
Morale, Welfare, and Recreation Committee on Armed Services House of
Representatives

In July 2000, the Defense Commissary Agency proposed changes to its regional
management structure that it expects will generate savings, improve
efficiencies, and provide more effective management of commissary
operations. The plan calls for eliminating the two area offices within the
Eastern Region and consolidating most of the Eastern Region?s operations at
the region?s headquarters at Virginia Beach, Virginia. The plan also called
for transferring the management of 25 of the Eastern Region?s commissaries
to the Agency?s Midwest Region, which is headquartered in San Antonio,
Texas. However, with the issuance of a revised plan in February 2001, this
portion of the proposal was deferred, pending further study.

In response to a request from the former Chairman and former Ranking
Minority Member, we reviewed the organizational and financial effectiveness
of the Defense Commissary Agency?s proposed restructuring actions.
Specifically, we determined whether (1) the estimates of costs and savings
from the planned consolidation of the Eastern Region?s operations reflect
all potential costs and savings and (2) the consolidation is the best way to
achieve regional efficiencies. We are also including some perspective on the
issue of regional span of control in providing oversight to commissaries
located within a region. The Agency intends to examine this issue in a
follow- on study of the current reorganization plan.

Although the Defense Commissary Agency?s proposed restructuring actions
should generate annual savings after initial expenses are recouped, the
Agency did not include all potential costs and savings in the estimates we
reviewed in the July 2000 plan. In calculating the estimates associated with
that proposal, Agency officials included only those expected costs and
savings associated with personnel- related actions, such as personnel
separation costs. While personnel- related actions are the primary cost and
savings elements in the reorganization, the Agency did not include other

United States General Accounting Office Washington, DC 20548

Results in Brief

Page 2 GAO- 01- 473 Defense Infrastructure

potential costs and savings such as operational costs. After we discussed
this issue with Agency officials, they revised their cost and savings
estimates. But the estimates are not yet fully refined and could still
change, pending the plan?s final approval. As of February 2001, the Agency?s
estimated one- time costs were about $1. 5 million, with annual net savings
of about $3.8 million thereafter.

Whether the proposed consolidation of the Eastern Region?s operations at
Virginia Beach is the best way to achieve efficiencies is unclear. Unlike
previous reorganization efforts, the Defense Commissary Agency?s current
effort did not compare the financial and operational implications of
alternative approaches to improving its regional operations. Although the
Agency?s views were mixed on whether the planned consolidation in the
Eastern Region is the best approach to achieving efficiencies, most of the
Agency?s officials we spoke with agreed that eliminating the two Eastern
regional area offices would most likely improve operations. While the
proposed consolidation should produce efficiencies, it may cause some
temporary loss of operational expertise because of the loss of some
personnel in the closing area offices. At the time of our review, the Agency
was developing plans to transition to the consolidated organization, but
those plans will not be finalized until after the reorganization proposal is
approved.

While the Agency?s July 2000 plan included shifting management
responsibility for 25 commissaries from the Eastern Region to the Midwest
Region, the Agency did not have documented analysis supporting the basis for
this proposal. After we expressed concern about this issue, the Agency
withdrew this concept and intends to perform further study to determine the
optimum number of stores to be managed within each region. To provide some
perspective on the issue, we sought views from within the Agency and the
commercial sector regarding regional span of control for effective and
efficient oversight operations. In general, we found no conclusive
information on what constitutes a reasonable span of control for a region in
oversight operations. Agency officials had mixed views on the number of
stores that a region could reasonably manage. An Agencydirected study of
seven commercial- sector firms in 1994 also showed mixed results, as these
firms had varying regional spans of control over their retail stores. Our
discussions with three commercial- sector retail firms produced similar
results. While this issue may be difficult for the Agency to resolve, the
commercial firms we contacted expressed a willingness to assist the Agency
in achieving efficiencies in its regional structure.

Page 3 GAO- 01- 473 Defense Infrastructure

We are making several recommendations to the Under Secretary of Defense
(Personnel and Readiness) to help ensure that changes made in the
organization and management of the Defense Commissary Agency are in the best
long- term interest of the commissary system. The Department of Defense
provided written comments on a draft of this report and agreed with our
findings and recommendations.

The Defense Commissary Agency (DeCA), headquartered at Fort Lee, Virginia,
is the Department of Defense?s designated agency for managing commissaries
on a worldwide basis. As of September 30, 2000, the Agency had 290 stores
and over 19, 000 employees under its purview and had annual sales in fiscal
year 2000 of about $5 billion. In providing services for its military
customers, DeCA strives to provide the lowest cost possible, charging
patrons only for the wholesale cost of goods plus a 5percent surcharge. The
annual cost of operating the Agency?s infrastructure was about $1 billion in
fiscal year 2000, which was funded primarily through direct appropriations
from the Congress.

To perform its mission, DeCA, in addition to its headquarters and field
operating activities, operates four regional offices that oversee management
of its commissaries. (See table 1.) Commissaries are, for the most part,
geographically dispersed throughout the world, and are located in 45 states
and many foreign countries. To assist regional management in overseeing
store operations, the regions employ zone managers, whose role is to work
with store managers to resolve problems and keep operations running
smoothly. Zone managers typically oversee from 7 to 10 stores, depending on,
among other things, the geographical dispersion of the stores within the
region. Background

Page 4 GAO- 01- 473 Defense Infrastructure

Table 1: Defense Commissary Agency?s Regional Offices (Fiscal Year 2000)

Dollars in billions

Region Number of stores a Sales volume Authorized personnel b

Eastern 106 $2.3 179 Midwest 34 0. 8 73 Western/ Pacific (Far East) 86 1. 5
153 European 64 0.4 132 Total 290 $5.0 537 a As of February 2001, the number
of stores decreased to 287; an additional six closures and one new store are
expected by October 2001. b Includes regional headquarters and area office
personnel only.

Source: Defense Commissary Agency.

As part of a larger effort to reduce costs and improve operations on an
Agency- wide basis, DeCA prepared a plan to reorganize its regional
management structure. In July 2000, the Agency submitted its plan for
approval to the Commissary Operating Board, which is comprised of
representatives from each of the military services. The Board, which has
day- to- day operational oversight responsibilities for DeCA, reports to the
Under Secretary of Defense (Personnel and Readiness), who exercises overall
supervision of DeCA. After we expressed concerns about the July 2000 plan,
DeCA redrafted its proposal and in February 2001 sent the revised plan to
the Commissary Operating Board for its approval. While the initial plan
affected both the Eastern and Midwest regions, the revised plan affects only
the Eastern Region and does not affect store- level operations. The key
component of the initial plan is unchanged in the revised plan. It involves
the closure of the two area offices within the Eastern Region- the Northern
Area Office at Fort Meade, Maryland, and the Southern Area Office at Maxwell
Air Force Base, Montgomery, Alabama- and the relocation of most operational
functions to the existing Eastern Region headquarters in Virginia Beach.
Through consolidation and a succeeding regional headquarters reorganization,
DeCA expects to reduce the number of Eastern Region personnel authorizations
from 179 to 122- a reduction of 57 spaces.

The July 2000 plan also called for transferring the management of 25 stores
located in the Eastern Region to the Midwest Region. Had this transfer been
retained in the revised plan, the number of stores in the Eastern Region
would have been reduced to 81, while the number of stores in the Midwest
Region would have increased to 59. However, the revised plan defers this
aspect of the reorganization for further study.

Page 5 GAO- 01- 473 Defense Infrastructure

DeCA?s initial estimates of costs and savings from its planned
reorganization did not include all the potential costs and savings
associated with the reorganization. That plan focused on personnel- related
actions affecting costs and savings and excluded, for example, other
potential operational costs, such as increased facility leasing expenses or
savings resulting from implementing the plan. While personnel- related
actions are most likely the largest determinant of costs and savings, the
total estimated costs and savings were not identified. On the basis of our
discussions with DeCA officials and a limited analysis of the revised plan,
DeCA has made an effort to more precisely identify one- time costs and
subsequent annual savings resulting from the reorganization. While the
estimates are not fully refined, the annual savings resulting from personnel
reductions in the reorganization should still be significant, once the
implementation costs are offset.

In contrast with the initial July 2000 plan that had estimated one- time
costs of about $1.2 million and annual savings of about $4. 6 million, the
revised reorganization plan contains estimates of one- time costs of about
$1. 5 million and annual savings of about $3. 8 million. With the revised
plan, the payback period for recouping the one- time costs is estimated at
about 5 months. As identified previously in the July 2000 plan, personnel-
related costs, which include separation costs and permanent change- of-
station costs for those who relocate from the closing offices to Virginia
Beach, constitute a large portion- nearly 50 percent- of the expected one-
time costs presented in the February 2001 plan. Likewise, the elimination of
personnel spaces by consolidating operations at Virginia Beach is the
primary component in the revised plan?s estimate of annual savings. However,
in revising the July 2000 plan, DeCA officials included some expected
operational costs, such as the costs for relocating equipment and increased
facility leasing costs at Virginia Beach, that have had the effect of
providing greater precision to the cost estimates.

Although the revised February 2001 plan includes more complete estimates,
these estimates should still be viewed as a rough approximation of the
actual figures for the following reasons:

 Personnel- related cost estimates are based on historical averages of the
percentages of DeCA personnel who have either voluntarily separated or
relocated. The actual numbers will be unknown until these personnel actions
occur as the plan is implemented.

 DeCA may be optimistic in assuming that it will not incur any involuntary
personnel separation costs because it believes that everyone who desires
Reorganization Plan?s

Estimates Do Not Include All Potential Costs and Savings

Page 6 GAO- 01- 473 Defense Infrastructure

employment will retain a job, whether within DeCA or another government
agency.

 Some changes in operational costs, such as business travel costs, are not
included in the analysis. While the consolidated operation may result in
increased travel costs to oversee store operations, DeCA officials told us
that any potential increase would not materially affect the expected annual
savings.

 A portion of the expected annual savings is predicated on a reduction of
35 additional positions in the Eastern Region Office after the
consolidation. At the time of our review, that figure had not been
finalized. Furthermore, the standard compensation factor used in calculating
the reductions is most likely too high because these reductions are expected
to include more lower- salaried employees. To the extent that these 35
positions are not reduced as planned, the expected annual savings could be
overstated, perhaps by as much as $280,000.

In developing its regional reorganization plans, DeCA management officials
did not consider alternative structural approaches to achieve operational
efficiencies and generate savings. However, on the basis of our discussions
with various DeCA officials and a review of prior reorganization
documentation, a number of alternatives could have been explored. Without a
critical analysis of the merits of potential alternative approaches, the
approach that would provide the most efficient operation is unclear.
Nonetheless, the proposed approach appears to offer an opportunity to
improve operational efficiency and save money.

While DeCA?s proposed plan affects only the Eastern Region, several
alternative approaches could have been considered. Some officials, for
example, believed that consolidating the three continental U. S. (CONUS)
regions into two- the Eastern and Western/ Pacific regions- and retaining a
European Region would be preferable to the existing plan. In this case, the
Midwest Region would be eliminated, and the management of its 34 stores
would be divided among the remaining two CONUS regions. While those
supporting this action believed that eliminating a regional headquarters
could reduce overhead costs, the resulting expected savings would have to be
weighed against the increased oversight workload of the assuming regions and
their ability to maintain quality service to their customers. When asked
whether this was a viable option, the DeCA Director told us that the Agency
was not prepared to undertake such a move, especially at the same time that
it was initiating agency- wide unit cost reduction initiatives and
instilling a business- like culture in its operations. Proposed

Reorganization May Not Be the Best Way to Achieve Efficiencies, but It
Should Improve Operations

Page 7 GAO- 01- 473 Defense Infrastructure

Among the other alternatives that could have merit were varying
configurations of the three CONUS regions. One such option suggested by some
officials was retaining the Western/ Pacific Region and creating Northern
and Southern regions with headquarters at Fort Meade and Maxwell Air Force
Base, respectively. In this scenario, the Midwest Region would be eliminated
and the management of its stores would be divided between the Northern and
Southern regions, which would also manage the existing Eastern Region?s
stores. Furthermore, the existing Eastern Region headquarters at Virginia
Beach would be eliminated. While this alternative would tend to preserve
operational expertise at the existing Fort Meade and Maxwell locations, it
would also mean increasing their staffs to assume functions now performed at
Virginia Beach. In any case, whether this or other alternatives would
provide a more efficient operation than that in the proposed plan is subject
to question, pending a detailed examination of the costs and benefits of
each approach.

Whether or not other alternatives would be more beneficial to the Agency
would require in- depth analysis by DeCA. Regardless, the proposed plan, if
properly implemented, should improve regional operations and create
efficiencies. A comparative DeCA analysis of the Eastern and Western/
Pacific regions shows that the Eastern Region currently has more staff to
accomplish a mission and scope of work similar to that of the Western/
Pacific Region. Furthermore, the analysis shows that the Western/ Pacific
Region, despite having fewer personnel, performed at a comparable level, as
measured by customer satisfaction and Inspector General inspection results,
to that of the Eastern Region. Most of the perceived overstaffing in the
Eastern Region- about 22 positions- was attributable to duplicative
management and administrative positions across the region?s three offices,
while the Western Region had consolidated operations. Furthermore, our
discussions with the Eastern Region?s former Director indicated that
efficiencies were lost because of (1) poor communications between the
region?s headquarters and its area offices and (2) overlapping roles and
responsibilities between the region?s headquarters and the area offices.
Most DeCA officials we spoke to agreed that the Eastern Region?s existing
organizational structure, which includes a headquarters and two area
offices, was an anomaly in DeCA?s organization and was not conducive to
smooth operations and maximum efficiency.

While promoting improved efficiency, the reorganization plan, if implemented
without proper planning to mitigate the potential loss of operational
expertise from departing personnel in the closing offices, could have a
detrimental effect on operational efficiency and customer

Page 8 GAO- 01- 473 Defense Infrastructure

service. Under the Eastern Region?s existing organization, much of the
operational responsibility for the day- to- day oversight of the stores
within the region rests with the two area offices that are to close under
the reorganization. For example, personnel within these offices visit stores
and assist store managers with contractor performance and operational issues
on a regular basis, thereby helping them to provide quality customer
service. Over time, many of these personnel have formed beneficial
relationships with the store managers and employees. With the transfer of
these responsibilities to the regional headquarters, it is important that
this assistance continue in a quality manner in order to minimize the
potential for degraded customer service. At the time of our review, the
Agency was developing plans to transition to the consolidated organization,
but those plans will not be finalized until after the reorganization
proposal is approved.

We found no conclusive information to suggest what a reasonable span of
control is for DeCA?s regions in performing oversight of commissaries within
the regions? boundaries. As previously noted, DeCA had no documented
analysis to support shifting the management of stores between regions, and
the Agency subsequently deferred this issue for further study. From our
limited evaluation of this issue, we found that views within DeCA on
adequate span of control were mixed and that subjectivity and managerial
style played important roles in the determination of DeCA?s views. A prior
DeCA- contracted study of commercial- sector retail firms? spans of control
was inconclusive as well. Furthermore, our recent discussions with three
commercial retail firms produced similar inconclusive results. The firms did
express an overall willingness, however, in assisting DeCA in its efforts to
reduce costs and promote efficiencies within its organizational structure.

Span of control is an important concept in determining the optimum number of
stores for a regional organization to manage most efficiently and cost-
effectively. While having a large number of stores within a region may save
money by proportionally reducing overhead expenses, it may result in
degraded operations and customer service if the oversight responsibility is
too demanding. On the other hand, a region with a smaller number of stores
may provide greater oversight and better service at the expense of
proportionally greater overhead costs. The difficulty is in determining what
is a reasonable number of stores to manage, balancing costs with quality of
service to the customer.

DeCA officials we spoke to had different views on how many commissaries a
region could reasonably manage, given their oversight Observations on

Regional Span of Control Issues

Page 9 GAO- 01- 473 Defense Infrastructure

responsibilities. In general, our discussions showed that, in many ways,
determining a reasonable span of control is a subjective judgment that
depends on such issues as managerial philosophy, style, and preference. Many
Eastern Region officials believed, for example, that they have managed and
could continue to manage their existing 106 stores without a problem. The
Eastern Region?s former Director, however, expressed concerns that his span
of control was too large to reasonably manage. The Midwest Director and
several of his staff generally favored a smaller number of stores per
region, stating that providing continued quality customer service and
routinely visiting geographically dispersed stores necessitated a smaller
span of control. In this regard, the Midwest Director questioned whether a
larger number, such as 106 stores in the Eastern Region, was manageable
without suffering degradations in operations and service.

Commercial- sector retail firms? practices and views on the appropriate span
of control for overseeing their store operations also appear to vary. A 1994
DeCA- sponsored study of seven commercial- sector firms by the HayGroup
(private organizational consultants) was inconclusive in specifying a common
or uniform number of stores that were managed within a firm?s regions. Our
recent discussion with three major commercial food retailers also showed
different views on span of control and the number of stores they managed
within each of their regions.

 One firm we visited operated about 180 stores in five contiguous states. A
management official from the firm told us that, although two divisions (or

?regions? in DeCA terminology) manage about 90 stores each, three divisions
with about 50 stores each would be more reasonable but probably more costly.
He further told us that having over 100 stores in a geographically dispersed
region like DeCA?s Eastern Region would probably be too much to properly
manage.

 A second firm we visited operated 578 stores in 22 states. A management
official from this firm believed that about 50 stores per region was a
reasonable structure. In this particular case, the firm builds its structure
around distribution centers and locates stores within 250 miles of a center.

 Finally, the third firm we visited was a much larger organization with
over 2,300 stores in 31 states. According to management officials from that
firm, their regions operate from 88 to 450 stores and their span of control
in managing these stores was generally not a problem. While the stores in
this firm were more geographically concentrated than DeCA?s stores, these
officials believed that having 100 stores in a DeCA region was probably
manageable, given the strong use of its zone managers within a region.

Page 10 GAO- 01- 473 Defense Infrastructure

While the results of our review of span of control issues were generally
inconclusive, it should be recognized that comparisons of business practices
between the commercial sector and DeCA are inherently difficult because of
different circumstances surrounding their respective operations. DeCA
believes that no comparable retail enterprises in either the government or
the private sector exist. Agency officials told us that, whereas DeCA?s
organization spans the world and its stores are generally widely dispersed,
most commercial firms have a greater concentration of stores within a given
area. Our limited contact with the commercial sector supports this
assertion. Furthermore, DeCA officials told us that many commercial firms
own and operate their own distribution centers within their regions, while
DeCA operates through direct deliveries from vendors and does not have
distribution centers within its CONUS regions. These and other differences
have an impact on span of control within a region?s operations.

Although the operations of the commercial sector and DeCA may not be
directly comparable, this does not imply that the Agency cannot take
advantage of commercial sector best practices that would be applicable to
organizing and managing its regional operations. In this regard, the firms
we contacted generally expressed a willingness to assist DeCA in reducing
costs and promoting organizational efficiency- business goals that are
common to both the commercial sector and DeCA. A corporate official from one
firm we contacted suggested that grocery executives could discuss their
experiences in increasing efficiency with DeCA management. Another firm?s
official believed that since DeCA is seeking to move to a more cost-
conscious environment, the Agency could probably benefit by reaching out to
the commercial food sector.

While the Defense Commissary Agency has not fully refined its cost and
savings estimates, it appears that, by eliminating the Eastern Region?s area
offices and consolidating those regional operations at its Virginia Beach
location, the Agency will produce savings and improve operations. However,
with the implementation of the plan comes a loss of operational expertise in
the closing offices that could potentially disrupt operations and customer
service. Whether the Agency?s proposed regional reorganization is the best
approach for achieving efficiencies is unclear because the Agency did not
assess alternative structural approaches to improving regional operations
and creating efficiencies. The plan is limited because it considers only the
Eastern Region and not the totality of the regional structure, which is to
be considered in the Agency?s follow- on study of the current reorganization
plan. Conclusions

Page 11 GAO- 01- 473 Defense Infrastructure

While the closure of the area offices is likely to improve efficiency, the
planned study to determine the optimum number of stores for the Agency?s
regions provides an additional opportunity for achieving additional
streamlining and improved regional operations and efficiencies. In this
regard, experience from commercial- sector retailers may provide useful
insights into determining how to shape the Agency?s future regional
structure.

If the proposed reorganization plan is approved for implementation, we
recommend that the Under Secretary of Defense (Personnel and Readiness), in
consultation with the Chairman, Commissary Operating Board, require that the
Director, Defense Commissary Agency, include steps in the Agency?s
transition plans to minimize the potential disruption of regional operations
caused by the loss of operational expertise from its closing offices.

As part of the Agency?s upcoming study of what is the optimum number of
stores in each of its regions, we recommend that the Under Secretary of
Defense (Personnel and Readiness), in consultation with the Chairman,
Commissary Operating Board, require that the Director, Defense Commissary
Agency,

 solicit commercial food retail firms? views on structuring regional
operations for improved operations and efficiency and

 assess whether other restructuring alternatives, such as the consolidation
of the three continental U. S. regions to two regions- an Eastern and
Western/ Pacific Region- would generate additional savings without
sacrificing quality service to its customers.

In its written comments on a draft of this report, the Department of Defense
agreed with our findings and recommendations. The Department?s comments are
presented in their entirety in the appendix. It also provided technical
clarifications, and where appropriate, we incorporated them in the report.

To determine whether the estimates of costs and savings from the planned
consolidation of the Eastern Region?s operations reflect all potential costs
and savings, we analyzed the estimates as presented in DeCA?s July 2000
proposal, along with the underlying assumptions and supporting detail. On a
more limited basis, we also analyzed, but did not verify, the reliability of
the revised estimates in DeCA?s February 2001 proposal. We also discussed
with DeCA officials their methodology for arriving at the estimates to
ensure that the logic was sound. Recommendations for

Executive Action Agency Comments and Our Evaluation

Scope and Methodology

Page 12 GAO- 01- 473 Defense Infrastructure

To determine whether the proposed consolidation was the best way to achieve
efficiencies, we examined planning documentation and interviewed key
officials across the Agency. In reviewing the plan?s documentation, we
sought out alternatives that may have been considered in developing the
proposal but found none. We subsequently interviewed various officials for
potential alternatives, but made no attempt to independently perform
comparative analyses of those that were identified. In interviewing
officials, we learned of prior organizational studies and reviewed available
documentation. We also sought views on the proposed approach from officials
within the DeCA headquarters as well as those most directly affected by the
reorganization. The latter include officials in the Eastern Region Office,
Virginia Beach, Virginia; Northern Area Office, Fort Meade, Maryland;
Southern Area Office, Maxwell Air Force Base, Montgomery, Alabama; and
Midwest Region Office, San Antonio, Texas. We also contacted several former
DeCA officials for their views on the reorganization plan and a historical
perspective leading up to the formulation of the plan.

Because DeCA is now studying regional span of control, an issue in the
Agency?s July 2000 proposal, we sought to obtain both the Agency and
commercial sector?s views on what constitutes a reasonable span of control
for a region to have in managing stores within its boundaries. In this
regard, we interviewed various DeCA officials, including recent former DeCA
managers, regarding span of control issues. We also reviewed a previous
study of commercial- sector retail management practices conducted by the
HayGroup, which was contracted by DeCA to study reorganization alternatives
in 1994. We also interviewed management officials from three grocers that
were in the top 25 nationwide in annual sales during 2000 to gain a sense of
their organizational structure and span of control in managing their stores.
To the extent possible, we compared the commercial data with that of DeCA?s
to ascertain whether any commercial best practices regarding span of control
would be applicable to DeCA?s store management. While we collected data for
comparative purposes, we could not generalize to all retail operations
because of our limited sample.

We conducted our review from July 2000 through March 2001 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to the Honorable Donald H. Rumsfeld,
Secretary of Defense; the Honorable Charles L. Cragin, Acting Under
Secretary of Defense (Personnel and Readiness); Lieutenant General Michael
E. Zettler, Chairman, Commissary Operating Board; Major General

Page 13 GAO- 01- 473 Defense Infrastructure

Robert J. Courter, Jr., Director, Defense Commissary Agency; the Honorable
Mitchell E. Daniels, Jr., Director, Office of Management and Budget; and
other interested parties. We will make copies available to others upon
request.

Please contact me at (202) 512- 8412 if you or your staff have any questions
concerning this report. Major contributors to this report were William
Crocker, James Reifsnyder, David Combs, and Arnett Sanders.

Barry W. Holman Director, Defense Capabilities and Management

Appendix: Comments From the Department of Defense

Page 14 GAO- 01- 473 Defense Infrastructure

Appendix: Comments From the Department of Defense

Appendix: Comments From the Department of Defense

Page 15 GAO- 01- 473 Defense Infrastructure

Appendix: Comments From the Department of Defense

Page 16 GAO- 01- 473 Defense Infrastructure (709535)

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