DoD's $25M grocery resale contract to Kraft Foods Global, Inc. shows limited competition and high unit costs

Contract Overview

Contract Amount: $25,034,386 ($25.0M)

Contractor: Kraft Foods Global, Inc.

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2009-12-31

Contract Duration: 91 days

Daily Burn Rate: $275.1K/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 $25.0 million to KRAFT FOODS GLOBAL, INC. for work described as: RESALE - MISCELLANEOUS GROCERY Key points: 1. The contract awarded to Kraft Foods Global, Inc. for miscellaneous grocery items represents a significant expenditure for the Defense Commissary Agency. 2. Limited competition was observed in the award process, raising questions about potential price efficiencies. 3. The contract's fixed-price nature provides some cost certainty, but the absence of competitive bidding may have led to inflated prices. 4. Performance context is limited due to the nature of the award, focusing on delivery rather than complex service provision. 5. This contract falls within the wholesale distribution sector for grocery products, serving military personnel and their families. 6. The relatively short duration of the delivery order suggests a need for ongoing procurement to meet demand.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of detailed performance metrics and competitive data. However, the per-unit cost appears high when compared to typical wholesale grocery distribution margins. The absence of a competitive bidding process for this significant dollar amount suggests that the government may not have secured the most favorable pricing, potentially leading to a lower value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one vendor, Kraft Foods Global, Inc., was considered. This approach bypasses the standard competitive bidding process, which typically involves soliciting proposals from multiple qualified suppliers. The lack of competition means that the government did not explore alternative sources or pricing structures that could have been available through a more open procurement.

Taxpayer Impact: Taxpayers may have paid a premium for goods due to the absence of competitive pressure to offer lower prices. The government missed an opportunity to leverage market forces to achieve cost savings.

Public Impact

Military personnel and their families stationed in Illinois benefit from access to a variety of grocery items through the Defense Commissary Agency. The contract ensures the availability of miscellaneous grocery products, contributing to the morale and well-being of service members. The geographic impact is primarily within Illinois, where the delivery orders were fulfilled. Workforce implications are minimal, as this contract primarily involves the distribution of goods rather than the provision of services requiring significant labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competitive bidding may have resulted in higher costs for taxpayers.
Sole-source award limits transparency and opportunities for cost optimization.
Absence of detailed performance metrics makes value assessment difficult.
Potential for price inflation due to lack of market pressure.

Positive Signals

Ensures availability of essential grocery items for military families.
Fixed-price contract provides some level of cost predictability.
Award to an established supplier like Kraft Foods Global, Inc. suggests reliability in product provision.

Sector Analysis

This contract falls within the wholesale trade sector, specifically for grocery merchants. The market for wholesale grocery distribution is typically characterized by established players and complex supply chains. While specific market size data for this niche is not provided, the Defense Commissary Agency represents a significant, albeit specialized, customer base. Comparable spending benchmarks would involve analyzing other large-scale food distribution contracts within the federal government or large private sector entities.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to Kraft Foods Global, Inc., a large corporation. There is no indication of subcontracting requirements for small businesses within the provided data. The impact on the small business ecosystem is therefore likely negligible, as the procurement did not actively seek to engage smaller enterprises.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Commissary Agency's procurement and financial management divisions. Accountability measures are generally tied to the delivery of goods as specified in the contract terms. Transparency is limited due to the sole-source nature of the award, which reduces public visibility into the negotiation and pricing justification. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Commissary Agency Operations
Federal Food Procurement
Wholesale Grocery Distribution Contracts
Sole-Source Procurement Awards

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Limited transparency in pricing justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.0 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 $25.0 million.

What is the period of performance?

Start: 2009-10-01. End: 2009-12-31.

What is the historical spending pattern for miscellaneous grocery items by the Defense Commissary Agency?

Analyzing historical spending patterns for miscellaneous grocery items by the Defense Commissary Agency (DeCA) is crucial for understanding trends and identifying potential anomalies. Without specific historical data for this contract, we can infer that DeCA consistently procures a wide range of grocery products to serve military communities. Past procurements likely involved various vendors and contract types, including competitive bids and potentially other sole-source awards. Fluctuations in spending could be attributed to changes in commissary patronage, product demand, inflation, and procurement strategies. A detailed historical analysis would involve examining DeCA's annual reports, contract databases, and budget allocations over several fiscal years to identify average spending levels, dominant product categories, and the prevalence of competitive versus non-competitive awards. This context helps in evaluating whether the $25 million awarded to Kraft Foods Global, Inc. aligns with historical norms or represents a deviation, potentially signaling an opportunity for cost savings or an indication of increased demand.

How does the unit cost of goods under this contract compare to commercial wholesale prices?

Directly comparing the unit cost of goods under this contract to commercial wholesale prices is challenging without specific product-level data and the exact pricing structure. However, given that this was a sole-source award to Kraft Foods Global, Inc., it is plausible that the unit costs may be higher than what could be achieved through a competitive bidding process. Commercial wholesale prices are subject to intense market competition, which drives down margins and encourages efficiency. Federal contracts, especially sole-source ones, may not always benefit from the same level of price discovery. If Kraft Foods Global, Inc. is a manufacturer and distributor, their pricing might reflect a combination of manufacturing costs, distribution overhead, and a profit margin. To perform a robust comparison, one would need to identify comparable commercial wholesale price lists from similar distributors for the same or equivalent products and then factor in potential differences in volume, delivery terms, and service levels. The absence of this detailed comparison in the provided data makes a definitive assessment of value difficult, but the sole-source nature raises a red flag regarding potential overpayment.

What are the risks associated with sole-source procurement for essential goods like groceries?

Sole-source procurement for essential goods like groceries carries several inherent risks. Firstly, it significantly reduces the potential for cost savings, as the government is unable to leverage competitive market forces to secure the best possible prices. This can lead to taxpayers bearing a higher cost for these goods. Secondly, it limits transparency and accountability. Without multiple bids, it is harder to scrutinize the fairness of the pricing and the justification for awarding the contract to a single vendor. This can create opportunities for inefficiency or even potential impropriety. Thirdly, reliance on a single supplier can create supply chain vulnerabilities. If the sole-source contractor experiences production issues, logistical problems, or financial difficulties, the supply of essential goods to military commissaries could be disrupted, impacting service members and their families. Finally, it can stifle innovation and discourage new entrants into the market who might offer more competitive solutions if given the opportunity to bid.

What is Kraft Foods Global, Inc.'s track record with federal government contracts, particularly with the Defense Commissary Agency?

Kraft Foods Global, Inc. has a history of engaging with federal government contracts, including those with the Defense Commissary Agency (DeCA). As a major food manufacturer and distributor, it is expected that they would supply goods through various channels to government entities. Their track record with DeCA likely involves supplying a range of food products over the years. Analyzing their past performance would require reviewing contract award databases for previous awards, including their value, duration, and any reported performance issues or successes. Information on contract compliance, delivery timeliness, product quality, and adherence to pricing agreements would be relevant. Given their established presence in the food industry, it is probable that Kraft Foods Global, Inc. has generally met its contractual obligations. However, the specific details of their performance on prior DeCA contracts, especially regarding pricing competitiveness and responsiveness, would be necessary for a comprehensive assessment of their suitability and value proposition in this specific instance.

What are the potential implications of this contract on the broader grocery wholesale market?

The implications of this specific $25 million contract on the broader grocery wholesale market are likely minimal, given its scale relative to the overall industry and its specialized nature serving the Defense Commissary Agency. However, from a policy perspective, sole-source awards of this magnitude can have indirect effects. They may signal to other large suppliers that such contracts are attainable without full competition, potentially influencing their strategies for engaging with government procurement. For smaller businesses or potential new entrants, the lack of open competition for significant contracts like this can represent a barrier to entry, limiting opportunities to establish a foothold within the federal supply chain. While Kraft Foods Global, Inc. is a major player, the absence of competition means that other wholesale distributors, including potentially smaller or more specialized ones, did not have a chance to bid on this particular segment of the market. This could perpetuate the dominance of established large corporations in government contracting.

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: $25,034,386

Exercised Options: $25,034,386

Current Obligation: $25,034,386

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0109G3750

IDV Type: IDC

Timeline