(Nov. 4) Changes in how the U.S. military procures produce for its commissaries is about to change.

That could mean a change worth $350 million for produce companies that want to supply military stores. That is how much the military spends for fresh produce for its commissaries.

Beginning Oct. 1, 2006, the Defense Commissary Agency, a unit of the U.S. Department of Defense, plans to handle all produce purchases for its 268 commissaries worldwide, including 180 in the U.S.

Buying gradually will shift to a contract basis, with any size produce company eligible to participate in bidding.

All buying for commissaries will shift from the Defense Supply Center, Philadelphia, which will continue to procure product for feeding programs for schools, Indian reservations and active military units serving abroad.

Details of the changes will be worked out at a roundtable discussion that the commissary agency’s senior management will conduct Nov. 16 in Atlanta.

“(The agency), like any company, is constantly evaluating itself and making changes to make it better,” said Carroll Allred, produce category manager for the Hopewell, Va.-based commissary agency. “As part of this process, we had a business model presented to us about a year ago, where we had a commercial company that said they could do what the Defense Supply Center in Philadelphia was doing.”

The agency was quickly convinced that a commercial model was the way to go, Allred said.

A test run of the new purchasing system this year at 20 commissaries in Virginia, Georgia, South Carolina, West Virginia and North Carolina earned passing grades, Allred said.

“We found several things to be beneficial for us and our consumers,” he said. “One, we increased tonnage by over 25% in all stores, on average. We thought that was significant.”

The current system has been a relative bargain, with commissary shoppers reaping at least 30% savings for all items over standard grocery stores, Allred said. But he added that the test run revealed additional savings, at least on produce items.

“We don’t know whether because it was less expensive (so) they were buying more, whether the quality was better (so) they were buying more or we had better promotional programs,” Allred said. “We’d like to think it was a combination of all three.”

The break on purchase cost is called an unpaid benefit to soldiers, said Jay Manning, the commissary agency’s deputy counsel for commercial law.

“It makes a whale of a difference in your grocery budget when you’re a junior enlisted guy,” Manning said.

It also means, potentially, more produce sales.

“These 20 stores during the six-month test did approximately $25 million (in cumulative produce sales) and increased sales at these stores about 10% over the old system,” Allred said.

The same 20 stores operating under the old system made about $22.5 million in sales during the same period in 2004, he said.

“The goal is to have all the contract work in place by Oct. 1 next year,” Manning said.

The government aims to follow the private sector’s model in purchasing and distribution, Manning said.

Procuring produce through the Defense Supply Center in Philadelphia was needlessly cumbersome, Allred said.

“The DSC in many ways is like an extra middle man,” he said. “And we’ve shortened the order process in a test to 24 hours, seven days a week.”

That wasn’t possible under the old system, he added.

“For us, Philadelphia will no longer be in the picture, but for the produce-supply world they retain the responsibility for troop feeding and for the procurement of produce for Indian reservations, school lunches, etc.,” he said.

Dana Waters, chief of the operations branch for the Philadelphia center’s produce unit, said in an e-mail that the Philadelphia procurement office already was changing practices before the commissary decision was made.

“We will continue to support small business but will be implementing a produce prime vendor concept,” he said. “The obvious impact is that we will be buying less volume.”

Waters said the Philadelphia center would cut produce staff but declined to say whether any would shift to the commissary agency.

For commissary shoppers, the new system should enhance the freshness and diversity of products available.

It also means a more diverse roster of produce suppliers, Allred said.

“Small farmers can come directly to the commissary, using the umbrella of the primary supplier and supply his produce quicker and more efficient than before,” Allred said. “So we think it’s going to give the smaller farmers and the individuals a greater chance of supplying this locally produced produce.”

More produce suppliers will be competing for commissary business, he added.