DoD's $16.2M grocery contract with Quaker Oats shows limited competition and raises value questions

Contract Overview

Contract Amount: $16,262,251 ($16.3M)

Contractor: Quaker Oats Company, the

Awarding Agency: Department of Defense

Start Date: 2010-01-01

End Date: 2010-03-31

Contract Duration: 89 days

Daily Burn Rate: $182.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: RESALE - MISCELLANEOUS GROCERY

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60661

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $16.3 million to QUAKER OATS COMPANY, THE for work described as: RESALE - MISCELLANEOUS GROCERY Key points: 1. The contract awarded to Quaker Oats Company for miscellaneous grocery items highlights a lack of competitive bidding. 2. The fixed-price nature of the contract provides some cost certainty but may not reflect the best market value. 3. The short duration of the delivery order suggests a tactical procurement rather than a long-term strategic need. 4. The absence of small business participation is noted, with no set-aside or subcontracting requirements specified. 5. The procurement falls under wholesale grocery merchant services, a broad category with potential for wider competition. 6. The contract's value, while significant, needs benchmarking against similar commissary or grocery provisions.

Value Assessment

Rating: fair

The contract's fixed-price structure offers predictability, but without competitive bidding, it's difficult to ascertain if the $16.2 million represents optimal value for money. Benchmarking against similar contracts for commissary supplies or bulk grocery procurement by other agencies would be necessary to assess pricing fairness. The lack of competition suggests potential overpayment or missed opportunities for cost savings.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. The data indicates 'NOT AVAILABLE FOR COMPETITION,' suggesting a specific justification was likely used, such as an existing relationship or unique product offering. The lack of multiple bidders means there was no price discovery through a competitive process, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to drive down prices. The government missed an opportunity to leverage market forces for better value.

Public Impact

Military personnel and their families at the specified Illinois location benefit from the availability of grocery items. The contract ensures the supply of miscellaneous grocery products through the Defense Commissary Agency. The geographic impact is limited to Illinois, where the delivery order was fulfilled. The contract supports the wholesale grocery merchant industry, though the specific impact on the broader workforce is minimal given the sole-source nature.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source award limits opportunities for other suppliers, including small businesses.
Fixed-price contract might not capture the most advantageous pricing if market conditions change.
Short contract duration could indicate a reactive procurement rather than strategic planning.

Positive Signals

Ensures availability of essential grocery items for military families.
Fixed-price contract provides cost certainty for this specific procurement.
Award to a known entity like Quaker Oats might ensure product quality and reliability.

Sector Analysis

The Defense Commissary Agency (DeCA) operates commissaries worldwide, providing groceries to military personnel and their families at reduced prices. This contract falls within the broader food and beverage wholesale sector, specifically serving the government's unique retail needs. The market for grocery wholesaling is vast, but government procurement often involves specific requirements and distribution channels. Benchmarking this contract's value against other DeCA contracts or similar large-scale food service contracts would provide better context.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by 'sb: false'. There is no information suggesting subcontracting opportunities for small businesses. The sole-source nature of the award further limits the potential for small business participation in this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Commissary Agency's contracting and financial management divisions. As a delivery order under a larger framework (though not explicitly detailed here), oversight might be managed at the task order level. Transparency is limited due to the sole-source nature, and specific accountability measures would depend on the contract's terms and conditions, which are not fully detailed. Inspector General involvement would likely occur if specific allegations of fraud, waste, or abuse arose.

Related Government Programs

Defense Commissary Agency Operations
Federal Food Procurement
Wholesale Grocery Distribution
Military Resale Services

Risk Flags

Lack of Competition
Potential for Overpricing
Limited Small Business Inclusion

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.3 million to QUAKER OATS COMPANY, THE. RESALE - MISCELLANEOUS GROCERY

Who is the contractor on this award?

The obligated recipient is QUAKER OATS COMPANY, THE.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Commissary Agency).

What is the total obligated amount?

The obligated amount is $16.3 million.

What is the period of performance?

Start: 2010-01-01. End: 2010-03-31.

What specific justification was provided for awarding this contract on a sole-source basis to The Quaker Oats Company?

The provided data indicates the contract was 'NOT AVAILABLE FOR COMPETITION,' which is synonymous with a sole-source award. Federal procurement regulations (like FAR Part 6) allow for sole-source awards under specific circumstances, such as when only one responsible source can provide the required supplies or services, or in cases of urgent and compelling need. Without access to the contract file or justification documentation, the precise reason remains unknown. However, potential justifications could include unique product formulations, proprietary processes, or a critical, time-sensitive need where only Quaker Oats could fulfill the requirement within the necessary timeframe for the Defense Commissary Agency.

How does the $16.2 million contract value compare to typical spending on miscellaneous grocery items by the Defense Commissary Agency?

Comparing the $16.2 million contract value requires context regarding the scope and duration. This specific award was a delivery order with an 89-day duration (January 1, 2010, to March 31, 2010). Annualizing this value ($16.2M / (89/365) ≈ $66.7M) suggests a significant annual spend if this were a recurring requirement. However, DeCA's overall annual sales exceed $15 billion, serving millions of patrons. This $16.2M delivery order likely represents a specific bulk purchase or a regional supply need rather than total agency spending. To assess value, it should be benchmarked against similar-sized bulk purchases of grocery items or against the per-unit cost of specific items procured through competitive means by DeCA or other government entities.

What are the potential risks associated with a sole-source contract for essential goods like groceries?

The primary risk of a sole-source contract for essential goods is the potential for inflated pricing due to the lack of competitive bidding. Without market pressure, the contractor may not be incentivized to offer the lowest possible price. Another risk is reduced innovation and service quality, as there is less pressure to improve offerings when competition is absent. Furthermore, sole-source awards can limit opportunities for other capable suppliers, including small businesses, to enter the market or secure government contracts. This can also lead to a dependency on a single supplier, creating vulnerability if that supplier faces disruptions.

What does the 'General Line Grocery Merchant Wholesalers' (NAICS 424410) classification imply about this contract?

The North American Industry Classification System (NAICS) code 424410, 'General Line Grocery Merchant Wholesalers,' indicates that the contractor, The Quaker Oats Company, is classified as a broad-line wholesale distributor of grocery products. This classification suggests that the company is involved in selling a wide variety of food and related household items to other businesses, such as retailers (like the Defense Commissary Agency). It implies that the contract likely involved the supply of a diverse range of grocery items, rather than highly specialized or niche products. This classification also suggests that other companies within this same category could potentially compete for similar contracts if the procurement were open.

Given the short duration (89 days), what might this contract have been intended to address?

The short duration of 89 days for this $16.2 million contract suggests it was likely intended to fulfill a specific, short-term need rather than an ongoing, long-term supply requirement. Possible scenarios include: covering a temporary supply gap, fulfilling an urgent requirement for a specific event or deployment, testing a new product line or supplier, or acting as an interim measure while a larger, more comprehensive contract was being established through competition. It could also represent a single large delivery order placed against an existing basic ordering agreement or indefinite-delivery indefinite-quantity (IDIQ) contract, although the sole-source nature complicates this interpretation unless the underlying agreement itself was sole-source.

Industry Classification

NAICS: Wholesale Trade › Grocery and Related Product Merchant Wholesalers › General Line Grocery Merchant Wholesalers

Product/Service Code: SUBSISTENCE

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Pepsico, Inc. (UEI: 001287762)

Address: 555 W MONROE ST, CHICAGO, IL, 60661

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $16,262,251

Exercised Options: $16,262,251

Current Obligation: $16,262,251

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0109G3799

IDV Type: IDC

Timeline