DoD's $23.7M Grocery Contract with Kraft Foods Raises Questions on Competition and Value

Contract Overview

Contract Amount: $23,702,346 ($23.7M)

Contractor: Kraft Foods Global, Inc.

Awarding Agency: Department of Defense

Start Date: 2010-04-01

End Date: 2010-06-30

Contract Duration: 90 days

Daily Burn Rate: $263.4K/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: NORTHFIELD, COOK County, ILLINOIS, 60093

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $23.7 million to KRAFT FOODS GLOBAL, INC. for work described as: RESALE - MISCELLANEOUS GROCERY Key points: 1. Significant spending on miscellaneous groceries highlights reliance on established suppliers. 2. Limited competition for this contract may lead to suboptimal pricing. 3. The short duration and fixed-price nature suggest potential for price volatility. 4. Analysis of the grocery wholesale sector is needed to benchmark this expenditure.

Value Assessment

Rating: questionable

The contract value of $23.7 million for a 90-day period is substantial. Without comparable contract data or a clear benchmark for 'miscellaneous grocery' wholesale, assessing value for money is difficult. The lack of competition further complicates this assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was not available for competition, indicating a potential sole-source or limited competition scenario. This lack of competitive bidding likely hindered price discovery and may have resulted in higher costs for the government.

Taxpayer Impact: Taxpayer funds are being spent on essential goods, but the absence of competition suggests that taxpayers may not be receiving the best possible price.

Public Impact

Commissary shoppers may see a wide variety of Kraft products, but the contract's structure impacts overall spending efficiency. The Defense Commissary Agency's procurement practices for essential goods are under scrutiny due to potential cost inefficiencies. This contract highlights the challenges in ensuring competitive pricing for routine supplies within large government agencies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Potential for overpayment
Short contract duration
Limited transparency on pricing benchmarks

Positive Signals

Essential goods procurement
Fixed-price contract limits cost escalation risk

Sector Analysis

The Defense Commissary Agency procures a wide range of goods, including groceries, to support military personnel and their families. Benchmarking grocery wholesale costs can be complex due to product variety and regional pricing, but competitive bidding is crucial for efficiency.

Small Business Impact

This contract does not appear to involve small businesses, as it is with Kraft Foods Global, Inc. Analysis should explore opportunities for small business participation in future commissary supply chains.

Oversight & Accountability

Oversight is needed to ensure the Defense Commissary Agency is maximizing competition and achieving cost savings in its procurement of essential goods. Regular reviews of procurement strategies are recommended.

Related Government Programs

General Line Grocery Merchant Wholesalers
Department of Defense Contracting
Defense Commissary Agency Programs

Risk Flags

Lack of competitive bidding
Potential for above-market pricing
Limited transparency on cost drivers
Short contract duration may not reflect long-term value
Absence of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.7 million to KRAFT FOODS GLOBAL, INC.. RESALE - MISCELLANEOUS GROCERY

Who is the contractor on this award?

The obligated recipient is KRAFT FOODS GLOBAL, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $23.7 million.

What is the period of performance?

Start: 2010-04-01. End: 2010-06-30.

What is the typical profit margin for wholesale grocery distributors, and how does Kraft's pricing compare within this sector?

Typical profit margins for wholesale grocery distributors can range from 1% to 5%, depending on the product category and volume. Without specific cost breakdowns or market analysis for the 'miscellaneous grocery' items procured under this contract, it's difficult to definitively assess if Kraft's pricing was competitive. The lack of competition prevents a direct comparison.

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

The primary risk of sole-source or limited-competition contracts for essential goods is inflated pricing due to the absence of market pressure. This can lead to inefficient use of taxpayer funds. Additionally, it can stifle innovation and reduce the incentive for suppliers to offer better terms. Dependence on a single supplier also creates vulnerability if that supplier faces disruptions.

How effective is the Defense Commissary Agency in securing competitive pricing for its diverse range of products?

The effectiveness of the Defense Commissary Agency in securing competitive pricing varies across its product categories. While some items may benefit from bulk purchasing power and competitive bidding, contracts like this one, which were not available for competition, suggest potential weaknesses in procurement strategy. A thorough review of their contracting methods is needed to ensure consistent cost-effectiveness.

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: Kraft Foods Inc. (UEI: 877147228)

Address: THREE LAKE DR, NORTHFIELD, IL, 60093

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

Financial Breakdown

Contract Ceiling: $23,702,346

Exercised Options: $23,702,346

Current Obligation: $23,702,346

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0109G3750

IDV Type: IDC

Timeline