• WASHINGTON

With Election Day in the rear-view mirror and the new year — and a new administration — right around the corner, the American Logistics Association (ALA) held an online webinar on the morning of Dec. 10 — which was sponsored by Tyson Foods — detailing developments in Washington that have major implications across the board for on-base commerce.

Hosted by ALA President Steve Rossetti, the 45-minute webinar outlined numerous topics, including the transition to the Trump Administration; factors affecting on-base programs under the new administration; and numerous others.

OPENING STATEMENTS

Rossetti opened the discussion by explaining the overall theme of the day’s meeting.

“We are in a very volatile environment, and ALA members are really the cream of the industry,” he stated. “They have invested in this channel heavily and the membership is just another major investment in this channel.

“I want to thank all of the ALA members for all of their support and the investment of your time and your resources to advance this channel, especially investing as we navigate some pretty volatile times that are on the horizon.

“There are a lot of elephants in the room right now … probably a whole herd of elephants … and what we try to do here at ALA is to break down the issues one by one, reassemble them into a way that can best advance the cause of this channel … .

“This is going to be a time that is going to call for lots of communication, and we will be ramping up our communication products as we enter the fray.”

ISSUES

• TRANSITION

Rossetti told attendees that at the moment, most of President-Elect Donald Trump’s nominees “have been set, and I think the big one right now is Pete Hegseth, the secretary of defense nominee who is making the rounds of Capitol Hill. He has been meeting with senators including Jodi Ernst (R-Iowa) and others, and they are pressing hard on that nomination.

“I can’t say right now where it is going to go, but this week looks better for Hegseth than last week, and I think it will all play out when the Senate Armed Services Committee has its nomination hearings probably during the lame duck session.”

The ALA president said other nominees that “are in play” include the directors of national intelligence and Homeland Security.

“All of them are up in the air, subject to nomination hearings and confirmation of the Senate, but we will just have to see how it goes,” he said. “I hesitate to make any predictions on that, but suffice it to say, Trump wants to hit the ground running with the inauguration on Jan. 20.”

• EXECUTIVE ORDERS

Rossetti said, “When he hits the ground running on Jan. 21, all indications are that he is going to have a wave of rescissions of executive orders.”

The ALA president noted that ALA has some key executive orders “that we are tracking and we are interested in and trying to provide input into that process.”

Rossetti said he foresees “a major deregulatory program taking place,” and along those lines, he stated that ALA has been developing a compliance platform for regulations, “and it isn’t only implementing regulations, but unwrapping regulations, so as the regulatory environment gets more complex, across the board, the compliance platform that we are developing will be very useful to the companies in this channel as they work to comply with regulations, and as regulations are unwrapped — which is going to be a major thrust of the Trump Administration — the platform will be valuable.”

The ALA president told attendees that when the new administration takes hold, many of the Biden executive orders “will be thrown in the trash,” and there will be a resurrection of a lot of the Trump executive orders, “especially on immigration.”

“It is going to be key going forward that we have our fingers on the pulse of all of this action, because especially for our major distributors, it has major implications on their operations,” he noted.

• DEPARTMENT OF GOVERNMENT EFFICIENCY

Rossetti told attendees that the creation of this entity has received the most feedback he has received during the past couple of weeks.

“This is an informal agency right now, headed by Elon Musk and Vivek Ramaswamy, and it has a big head of steam,” he noted.

“What we will see, at least initially, is them going after some pretty big targets in this area,” he continued. “They will go after rescission of existing money … this probably will be money that was allocated in the various bills that were put forth by the Biden Administration, especially in some of the areas of climate control and things like that, like the Inflation Reduction Act has a couple of trillion dollars at play, and they will go after those … going after deregulation … looking at the scrapping of tax credits … a big emphasis will be on ‘return to office.’

“One of the points that ALA is making is that our system during the pandemic — both the people in the industry and at the agencies — were in the stores and on the bases serving the military patron to this day.

“They actually show up for work, and that sets us apart from other governmental agencies, because of the nature of what we do. We have to show up to take of our people, and we will be making that point to the administration.”

Rossetti believes that part of this entity’s focus will be on tech modernization, “especially with Musk in there,” and the overhaul of federal technology across the board.

Speaking about this entity in general terms, “At ALA, we have been working over the years to head off threats to this system,” the ALA president said. “We have had privatization threats, we’ve had appropriations cuts over the last 10 or 15 years, probably four major threats to this system.

“We have been able to push those back because of the merits of the system. What we are doing right now at ALA is working informally with people in government in building a case for this system in the event that something comes up, where they might want to privatize or eliminate appropriations, things like that.

“We have an excellent case to make, and the case that we are developing centers around two things: one is the criticality of making sure that our military people get products, especially in remote and overseas areas, and paradoxically, the pandemic gave us a very strong argument, because this system shined during the pandemic.”

Rossetti continued, “We were able to make sure that that the mom in Baumholder had baby formula during the critical dark days of the pandemic, because of the wonderful nature of this system, and the commissary agency and the exchanges and our supply chain network of distributors, manufacturer reps and manufacturers, all making sure products kept flowing. We will make that a central part of our argument.”

He said the second thing to take into account is that this system is “unique” from other government entities; “In fact, it is only government entity that generates more than it consumes.

“If Musk or any of these people are looking for areas of efficiency, we would argue that you want to emulate what we do, because it actually is a ‘perpetual motion machine,’ a ‘self-licking ice cream cone’ that generates more than it consumes, and it is something that you don’t want to wreck; it’s something to emulate throughout government, because it is a shining example of how the private sector and the government work together.”

Rossetti said that ALA is “developing themes, developing this all together” in the event that “we get attacked,” but he added, “We don’t want to move ahead of the process … but we are developing these things, and fine tuning this narrative.”

Further, the ALA president said that at least early on, “The Trump Administration generates sound-bytes during its transition … we want to make sure that our sound bytes are better than what might come at us … to make sure that nothing bad happens to this system.”

• RECONCILIATION

Rossetti said the process of reconciliation will be present as Trump begins to shape his term.

“They will be using tools … and over the years, Congress has given the executive branch a lot of authority in the budget process, and there are tools such as rescissions, which is clawing back money that has been appropriated … and fast-tracking legislation through the reconciliation process,” Rossetti told attendees.

“In the lame duck session and immediately after this session — for Congress Jan. 3 and Trump gets sworn in on Jan. 20 — you will see them move with a process called reconciliation,” he said. “Any legislation that advanced has to do with existing budget authorities that are provided, and the call of what is included in fast tracking reconciliation and having a simple majority over the Senate to enact reconciliation measures is the process that will go forward.

“You will probably see a tax package, and some other packages having to do with entitlements … and that will be a lot of activity that will be in the lame duck session and immediately afterward using this process.”

• FUNDING GOVERNMENT

The ALA president said that the current continuing resolution that is funding government ends on Dec. 20.

“We are about 90-percent certain that the government will stay open after that date, with a continuing resolution that will probably carry out to the February/March time frame,” he stated. “They will ‘kick the can’ on appropriations and keep the government running.”

Rossetti added, “We have built in insulating measures for this system — even in the event of a government shutdown — to keep the stores open, so we have been able to make sure that you are still going to continue to operate during any type of termination, or expiration, of appropriations … of course, non-appropriated fund programs are not greatly affected by any expiration of appropriations.

“So, we will be OK in the event of a government shutdown.”

• DEBT CEILING

Rossetti said that debt ceiling “is another thing.”

This comes up on Jan. 1, and he believes, “That is going to be another battle, but what you will probably see is that we will exceed the debt ceiling and miss the deadline date for complying with the debt ceiling, but then the government puts in what they call an ‘extraordinary measures,’ raiding other accounts to keep the government running while Congress deliberates on raising the debt ceiling.

“They key thing here is that interest on the debt is at about $1 trillion a year, and in the past, they have been able to use ‘extraordinary measures’ to keep the government open.

“We believe that while you had 90 days of flex built into the system, that is probably cut in half because of the interest on the national debt, so we will be watching that one closely … and that, of course, is another threat to appropriations.”

• NATIONAL DEFENSE AUTHORIZATION ACT

Rossetti told attendees that the NDAA came out over the weekend, and ALA put out a communication discussing some of the measures of this act.

“The House will probably vote on 2025 defense policy this week, it should move through the legislative process very quickly,” and he said there are several key factors to discuss.

“One is DeCA funding,” he stated. “Our record funding level for DeCA, at $1.57 billion … both the authorizers and the appropriators will sustain that level of support based on what they had in their markups, and I do want to compliment the Department of Defense and the Defense Commissary Agency for all of the efforts that they have put into assuring that those appropriation levels remain high … and that is a recognition of the role the commissaries play in food security.”

• NDAA: BASE ACCESS PROVISION

Rossetti noted that there are many provisions in the bill encouraging base access.

“We pushed those provisions out yesterday, and we are going to be working with our allies in Congress that are moving to standardize base access and make it easier for people to get onto the base,” he said.

Rossetti said that during the past week, the administration, the Department of Defense and the Department of Veterans Affairs “got together to streamline base access for veterans, who now have patronage privileges on base, and that basically takes the veterans identification card and allows them to present that at the guard office and then register their Real ID, their driver’s license, and they can speed through the system, using the Defense Diametric Identification System to get on base.

“That’s a big plus. Congress put some teeth in the provisions for base access; they said they would cut the defense travel budget by 5 percent if we don’t get this report on base access being streamlined and standardized.

“We have been working on our Congressional allies on this, trying to get a secure, expedient way to get people on and off base, not only for patrons but also for deliveries.”

• NDAA: QUALITY-OF-LIFE COMMISSION PROVISION

The ALA president noted that a quality-of-life provision was put into their version of the bill, “but that was tossed by the conferees.”

However, he noted that House Armed Services Chairman Mike Rogers (R-Ala.) and Don Bacon (R-Neb.) chairman of the Quality-of-Life Panel, pushed forward a series of measures in the House version, which they called the ‘Quality-of-Life Bill,’ when they discharged it.

“This included a 14.5-percent pay raise for junior enlisted E-1s to E-3s, and now, the department is going to have to move forward with pay compression of E-1 to E-4s that they are going to have to accommodate this increase, and that is going to be a big boost for enlisted personnel,” Rossetti noted.

• NDAA: FOOD

There was a lot of activity in the defense bill on the subject of food, including food service on installations.

“There was a Government Accountability Office report which came out earlier this year related to on-base food service, and Congress said we want you to implement all of the recommendations in that report,” Rossetti stated. “There will be implications for your business, and quality of life for the military, and we will be pushing out that information shortly.”

Another food breakthrough that Rossetti noted is that the Secretary of the Army was presented with the authority to issue a meal card, a declining-balance card for the basic allowance for subsistence, which will be redeemable at most of the locations on base, including the commissaries and exchanges.

“Both of these are major steps forward in the transformation area,” Rossetti noted, alluding to an ALA conference in the spring focused on the food area, “and all of the implications, including technology used to streamline food delivery on base.

“This has a major effect on our operations in the sense that there is so much basic allowance for subsistence that the troops are not using because either the food facilities are inadequate or the hours of operation are not appropriate for their work schedule, so they are leaving hundreds of millions of dollars on the table, so we hope that this initiative will capture some of that.”

• PORT STRIKE

Rossetti said that all indications lead to the port strike being a go.

“The way the major ocean carriers and the ports are behaving … you kind of get an insight on whether this is going to happen, but it looks like it is going to happen,” he said. “All of the shipping schedules have been adjusted, and the port operations are getting adjusted … all of the signals that a strike is imminent are out there.”

The ALA president said that the current contract expires in mid-January, and since the expiration date is January 16, he believes that this is “interesting timing.”

According to Rossetti, “We have the new president getting sworn in on Jan. 20 … we have Biden, who is very pro-union, but who did not intervene the last time the strike came up … I don’t know how Trump is going to handle this situation … .

“Even if they invoke Taft-Hartley — which forces people back to work — it is going to be disruptive in the sense that there are going to be port slowdowns and so forth without a contract.

“I know that the last ship cutoff for transport is going to be about Jan. 10, and we are working now with the Department of Defense on a work-around, where we can get a waiver to allow U.S. vessels to carry U.S. products.”

Rossetti said he sent a letter to the secretary of defense a couple of weeks ago, urging the secretary to give priority to consumer products to Europe and the Caribbean, in the event of an East Coast or Gulf Coast strike.

Whatever happens, he added that he wanted to acknowledge the exchanges and DeCA for working with ALA, for working with the U.S. Transportation Command and all the entities involved in this situation “to make sure that shipments are front-loaded in anticipation of this strike. All of the logistics people in the agencies have done remarkable work here, so we want to thank industry and all of the folks that work with these agency officials to mitigate as much as possible the pain that could be associated with this strike.

“Going forward, we have to plan on it. The last time the strike happened, we had four days. We are still unwrapping the impact of that … now what they are talking about is three or four weeks, and we have to hope for the best but prepare for the worst, and make sure that we have sufficient processes in place to ensure the unimpeded flow of products to our wonderful folks overseas.”

• TARIFFS

“We have the threat of major tariff action by the incoming administration,” Rossetti said. “I think it is going to be juxtaposed with the port strike.

“The president-elect has said that he wants to have a 25-percent tariff on products coming into the country for Mexico and Canada, and even a higher tariff for some other nations and for China.

“This is yet to be seen. It is a mixed bag over in the transition office at Mar-A-Lago … most people say, including the treasury secretary nominee, that what we would probably have is the threat of tariffs across the board, but then a rollback of that threat, as people came to the table, concessions will be made.”

Rossetti noted that there is a difference in tariffs this time around, especially related to China.

“This is the second Trump Administration, and they did have tariffs during the first Trump Administration,” he related. “The Chinese, especially, have structured retaliatory measures especially for the flow of critical raw materials that they would counter with the imposition of any tariffs.

“It is different, the pushback is going to be far greater from other nations as we enter the tariff environment, the president wants a tax cut, which is going to be advanced during the reconciliation process I mentioned this spring, he has two bill payers for those tariffs, one is the tax cut, and the other is government efficiencies.

“Whether or not those options materialize in real dollars, you are still going to have the incoming administration saying that these bill players plus other things are going to be sufficient to keep the Trump tax cuts n place, at least for the next one or two years. You will see quite a bit of activity on this.”

• MINIMUM WAGE

“There is a lot of action going on here,” Rossetti said. “President Biden signed an executive order that mandated a $15 per hour minimum wage, which has since gone up to $20 per hour for all federal programs that are included in non-appropriated fund activities, and the concessionaires and the contractors who interface with all of these agencies.

“This has had a major effect on operations, especially in the exchanges. They have had to take extraordinary measures to try and cope with it. It has had an effect on concession operators, and on industry, as we have had to raise our minimum wages for those who work on base in the stores and those that have contracts with the government.

“There was a recent court ruling that didn’t just say that the federal minimum wage was illegal, it also said it was ‘stupid.’ Basically, it cost the government $1.8 billion. Keep in mind, 90 percent of the increase in the minimum wage fell to the Department of Defense, so this is a major impact.

“The exchanges have had to go to more unmanned operations, and they don’t want to raise prices for the troops, they held the line on that, but they had to take extraordinary efficiency measures, not only in store operations but also in their relationships with industry, and pressing for margins and taking deals for discount money and throwing it to operations.”

Rossetti said the minimum wage has had “a major, reverberating effect across the board.

“ALA has been on this. We have taken the court ruling, we’re taking something called ‘The Chevron Decision,’ and we are assimilating that all into a product … we’re going to make a push to get this wage released in the next administration.

“We are not asking for employees to get paid less for those already have gotten this wage; but we are saying that the sane way to approach this — you don’t want to pay California wages in Alabama — so the sane way of doing this is to go to the locality pay process.

“There is an office that is part of the Department of Defense called ‘The Minimum Wage Price Fixing Authority,’ that has the mechanism for adjusting local pay scales to where we have Alabama wages in Alabama and California wages in California, and it was not disruptive to operations. We want to return to that and relieve some of the pressure on our exchange partners and on industry.”

Rossetti said that ALA has drafted an alternative executive order “that we will be shopping around,” but he added, “We feel the pain. We feel your pain. We want to make sure that this system, which is s critical to the well-being of our military, prospers and remains intact.”

CLOSING REMARKS

“It is one thing to monitor what is going on, but it is another thing to act on it,” Rossetti told attendees. “I want you to know that ALA is not only monitoring it, but what our members expect and what we need to do is to act on it.

“We are going to use all the relationships in the administration and in the transition group and in the incoming Congress to make sure that we take actions that positively affect your operations. …

“The entire board and councils of your association are going to be working very diligently to navigate through all of this volatility. We are not just going to be monitoring, we are going to be acting. We look forward to and appreciate all of the input from industry leaders that we work with in the association in terms of developing the narrative for this system, making sure we plow through this period of volatility.”

Rossetti added that more short webinars like this one are on the docket for the coming year, discussing issues that impact the military resale industry.