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Is This A Smart Move For Uncle Sam?

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Our U.S. Government is a big customer of American businesses, and our Defense Department is a big buyer of everything from guns to chicken to candy for our armed forces.  In May of 2014, the Defense Logistics Agency which coordinates purchasing products for the military announced a plan to lower costs and improve efficiency.  But the plan also called for cutting the number of suppliers which means many businesses will lose government contracts.  And we have to ask if cutting the number of suppliers will lower costs or raise them?

IS CUTTING SUPPLIERS TO CUT COSTS A SMART MOVE FOR UNCLE SAM?

Update July 13, 2014  You probably never heard of the Defense Logistics Agency but its the military office that buys goods and services for the armed services including food to feed the military at bases and in the field, including when they are in combat zones.  In May of this year, the Defense Logistics Agency announced a plan to dramatically cut the number of suppliers of various food items with the goal of controlling costs and getting a better deal for the government and ultimately for taxpayers.  But we have to ask if cutting the number of suppliers from many suppliers to just a few creating an oligopoly is wise and will in fact limit competition and possibly raise prices?  We also have to ask if cutting the number of suppliers might put the government's supply program in jeopardy if for some reason something impacts the few suppliers that the government has chosen to do business with?

In a document available on the Internet (click here) the Defense Logistics Agency outlined a plan that listed the reductions in the number of suppliers for various food items.  For example, the number of suppliers of chicken would be reduced from 26 to 2 and they would share what amounts to $121-million of sales; the number of turkey suppliers would drop from 25 to 2 and they would share $28-million of sales; the number of beef suppliers would drop from 31 to 3 and they would share $185-million in sales.  Critics of the plan point out that consolidating the supply chain in so few companies risks price hikes in the future and a lack of supplies should one or more of the companies run into production problems.

The DLA also says in its report that by dealing with fewer suppliers it can get a better grip on prices and auditing costs.  But critics wonder if the few suppliers who remain -- most likely big businesses -- will have any incentive to control prices.  Critics wonder if by eliminating smaller producers the DLA is also cutting off competitors who might have more incentives to supply the DLA at lower prices.

There is also the possibility that jobs will be lost as more suppliers are cut from the DLA source list -- however the DLA report does not discuss this.

One key question is simply this: is it better to have more suppliers competing for government work or just a few, hand-picked suppliers, selling goods and services to the government?  The DLA is looking for savings of 10% to 20% with one-stop shopping by making these changes.  We have to ask if fewer competitors will really accomplish those savings?

 

Here on our new media website "Moneyman" Alan Mendelson who is the original Best Deals TV Show reporter on KCAL9 and consumer advocate, shows you the best deals on TV, and the best buys, bargains and where savvy shoppers go to save, and how to get the most for "your money" with the best of Los Angeles, Orange County, Ventura County, Riverside County and San Bernardino County.  Our Best Buys TV Show has the best TV deals and is the only regularly scheduled weekly best deals TV show in Southern California.  We show you the best buys and best deals on TV and more deals and bargains on www.alanbestbuys.com and www.bestbuystvshow.com and watch for our Las Vegas TV show Vegas Best Buys.  Some of the content can come from paid advertising and from our advertiser paid TV infomercial programs.  The Best Buys TV Show is a paid infomercial program which may also include news and information which is not sponsored or paid for by advertisers.  AlanBestBuys.com has the highest ranking among competitive sites in Southern California according to the independent website ranking companies Alexa.com and Quantcast.com and our Best Buys TV Show is the most watched shopping and consumer information show in Southern California.

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