Brand-name exemption at military commissaries could be at risk

Published 10:58 pm Friday, July 2, 2010

One great strength of military commissaries is that patrons can buy brand-name items at deep discounts, comfortable in the knowledge they are quality products, food safety isn’t an issue and most goods are identical to those sold commercially off base and back home.

The brand-name system brings another benefit, commissary officials say. It saves the Defense Commissary Agency many millions of dollars a year in acquisition and support costs.

That’s because the agency can stock brand names without the expense and hassle of holding “full and open competition” and having to manage hundreds of separate contracts. It does so because of an exception written years ago into the law that controls almost everything the government buys.

The agency says this brand-name exception allows the real competition to occur on commissary shelves, with winners determined by how shoppers choose best value just as they do in any supermarket.

But those savings are now risk, officials maintain, as Massachusetts lawmakers press to have a New England seafood company “grandfathered” from a tighter brand-name exemption that Congress imposed on commissaries in 1996.

“The current system works well,” said Tom Milks, chief operating officer and deputy director of the commissary agency. “Having that brand-name exemption saves us close to $100 million in acquisition costs, paper costs, tracking and bidding, resolving grievances and protests, and everything else. I don’t think it needs to be tampered with.”

Yet it’s hard not to sympathize with the company now challenging the brand-name system, or more specifically, challenging how Congress changed that system 14 years ago to keep brand name manufacturers happy.

Alder Foods Inc. has been a commissary supplier of Rainbow Seafood products for 45 years. Rainbow shrimp is a category leader among commissary shoppers, offering a 31 percent savings compared with the cost of the same quality of shrimp sold in commercial stores.

The problem is this: Rainbow products aren’t sold in commercial stores. They have one customer, the commissary, and haven’t needed another until now. But under the revision to the commissary brand-name exemption Congress made back in 1996, Rainbow products no longer can be considered brand-name items that can be exempt from the competition requirements of federal contracting law. Only if they begin marketing their product commercially can they stay on the shelves.

On behalf of Alder Foods, Sen. John Kerry, D-Mass., has urged the Department of Defense to “reconsider the elimination of the grandfather exception” that had allowed Rainbow Seafood products to be sold in commissaries for decades, and even since the brand-name exemption was toughened back in 1996.

The problem only came to the attention of agency lawyers in the past year when a competitor to Alder Foods, trying to put its own products on commissary shelves, was told it didn’t qualify for the brand-name exemption because it didn’t sell the same products to commercial stores.

Well, what about Rainbow Seafood products, the company asked? They didn’t sell their products commercially either. Whoops.

The commissary agency sent notices of trade out in May to suppliers of 461 products that they will now have to begin marketing their products commercially, by Dec. 31, 2010, or be pulled from commissary shelves.

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