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FPCD-79-60 1 (1979-05-22)

handle is hein.gao/gaobaazfu0001 and id is 1 raw text is: O OCMPTP@LXg G4ERAL OF ni. UN.rrg IMAM3 B-160813 W MAY 2, 1979 The Honorable Warren G. Magnuson Chairman, Committee on Appropriations Unitee Stats Senate The Honorable Jamie L. Whitten Chairman, Committee on Appropriations House of Representatives The two major military exchange systoms--the Army and Air Force Exchange Service and the Navy Resale System Office--each operate a mail-order catalog system to serve authorized patronsr primarily overseas. -fiscl-yea- - 1978 these two systc .s generated sales of about $58.5 mil- lion in nonessential items and prcfies of $1.9 million which were distributed to support other morale, welfare, and recreation programs. On the basis of our analyses, we concluded that consolidtting the two systems wculd reduce annual nonappropriated fund operating costs by about $1 mil- lion and appropriated funds by about $488,000 a year. (See enc. I.) Department of Defense (DOD) officials were aware sev- eral years ago that savings were possible. Exchange offi- cials determined in 1975 that consolidating the catalog systems was feasible and would result in savings. In 1978 the Defeinse Audit Service reported that a consolidated cat- alog system would be cost effective and that DOD should consider it. All of the military services except the Navy agreed; its principal concerns with consolidation have been that the exact amount of savings has not been determined and an equitable sharing of the total profits from a con- solidated operation has not been proposed. In February 1979 DOD requested exchange officials to maxe another fea- sibility study. DOD officials told us that they plan no further action until the new study is completed. We believe that the feasibility of consolidating these systems has been demonstrated and that further delays would only waste scarce resources. Consolidation could increase profits, lower prices to the patrons, and save taxpayers al- most $500,000 annually. We recommend that the Secretary of FPCD-79-60 (963087)

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