DoD's $26.5M cheese resale contract awarded to Kraft Foods Global, Inc. raises value concerns

Contract Overview

Contract Amount: $26,459,588 ($26.5M)

Contractor: Kraft Foods Global, Inc.

Awarding Agency: Department of Defense

Start Date: 2012-01-01

End Date: 2012-03-31

Contract Duration: 90 days

Daily Burn Rate: $294.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: RESALE - CHEESE

Place of Performance

Location: NORTHFIELD, COOK County, ILLINOIS, 60093

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $26.5 million to KRAFT FOODS GLOBAL, INC. for work described as: RESALE - CHEESE Key points: 1. The contract's value proposition is questionable given the short duration and lack of detailed performance metrics. 2. Competition dynamics were absent, with a 'NOT AVAILABLE FOR COMPETITION' designation. 3. Risk indicators include potential overpayment due to lack of competition and limited oversight. 4. Performance context is minimal, with only a 90-day duration and no clear success criteria. 5. Sector positioning is within the Defense Commissary Agency's food supply chain, a critical but potentially inefficient area for procurement. 6. The contract's fixed price structure offers some cost certainty but may not reflect true market value without competition.

Value Assessment

Rating: questionable

The contract awarded to Kraft Foods Global, Inc. for cheese resale at $26.5 million over 90 days appears to be a high per-diem cost. Without comparable contracts or detailed breakdowns of services rendered, it is difficult to benchmark the value effectively. The lack of competition further hinders a robust value assessment, suggesting potential for inflated pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was designated as 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source award. This means there was no open bidding process, and only one vendor, Kraft Foods Global, Inc., was considered. The absence of competition limits price discovery and may lead to less favorable terms for the government.

Taxpayer Impact: Taxpayers may have paid a premium for the cheese due to the lack of competitive bidding. Without alternative quotes, it's impossible to determine if a lower price could have been secured.

Public Impact

Military personnel and their families stationed in Illinois benefit from the availability of cheese through the Defense Commissary Agency. The service delivered is the resale of cheese, a staple food item. The geographic impact is limited to Illinois, where the contract was managed. Workforce implications are minimal, primarily related to the logistics and distribution of the food product.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition could lead to inflated prices.
Short contract duration (90 days) suggests a potentially urgent or temporary need, raising questions about long-term planning.
Absence of detailed performance metrics makes it difficult to assess contractor performance and value for money.
The high dollar amount for a short-term food resale contract warrants scrutiny.

Positive Signals

Award to a known entity (Kraft Foods Global, Inc.) may imply established supply chain relationships.
Firm Fixed Price contract provides cost certainty for the government.

Sector Analysis

This contract falls within the broader food and beverage wholesale sector, specifically serving the Defense Commissary Agency. The market for food distribution to military installations is a specialized niche within the larger grocery wholesale industry. Comparable spending benchmarks are difficult to establish without more specific data on the types and quantities of cheese procured, but large-scale food contracts for government entities can run into tens or hundreds of millions of dollars annually.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the award to Kraft Foods Global, Inc., a large corporation, it is unlikely that significant subcontracting opportunities for small businesses were a primary focus of this specific award. The impact on the small business ecosystem is likely negligible.

Oversight & Accountability

Oversight mechanisms for this contract are not detailed in the provided data. However, as a Department of Defense contract, it would typically fall under the purview of the Defense Contract Audit Agency (DCAA) for financial audits and potentially the Inspector General for investigations into fraud, waste, or abuse. Transparency is limited due to the sole-source nature and lack of public performance data.

Related Government Programs

Defense Commissary Agency Operations
Food Procurement for Military Personnel
Grocery Wholesale Contracts

Risk Flags

Sole-source award without clear justification
High dollar value for a short-term commodity contract
Lack of performance metrics
Potential for lack of price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.5 million to KRAFT FOODS GLOBAL, INC.. RESALE - CHEESE

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 $26.5 million.

What is the period of performance?

Start: 2012-01-01. End: 2012-03-31.

What is the specific type and quantity of cheese procured under this contract?

The provided data only specifies 'RESALE - CHEESE' and does not detail the specific types (e.g., cheddar, mozzarella, swiss) or the exact quantities procured. The total award amount was $26,459,587.52 over a 90-day period. Without this granular information, it is challenging to perform a precise cost-per-unit analysis or compare it effectively to market prices for specific cheese varieties. This lack of detail is a significant limitation in assessing the contract's value for money.

Why was this contract not competed?

The contract was designated as 'NOT AVAILABLE FOR COMPETITION,' which is a sole-source justification. Common reasons for sole-sourcing include unique capabilities of a single contractor, urgent and compelling needs where competition is impractical, or specific government requirements that only one entity can meet. However, for a commodity like cheese, the rationale for not competing this $26.5 million, 90-day contract is unclear and warrants further investigation. It raises questions about whether adequate market research was conducted to identify potential competitors.

What is the historical spending on cheese resale by the Defense Commissary Agency?

The provided data only covers this specific 90-day delivery order from January 1, 2012, to March 31, 2012. It does not offer historical spending patterns for cheese resale by the Defense Commissary Agency (DECA). To understand historical trends, one would need to examine DECA's procurement records over multiple fiscal years, looking for similar contracts, their values, durations, and competition levels. This would help determine if this $26.5 million expenditure is typical or an outlier.

What are the performance standards and metrics for this contract?

The provided data does not include any specific performance standards or metrics associated with this contract. For a food resale contract, typical metrics might include on-time delivery rates, product quality standards (e.g., freshness, adherence to specifications), order accuracy, and customer satisfaction within the commissaries. The absence of such details makes it difficult to evaluate Kraft Foods Global, Inc.'s performance and whether the government received adequate value for the $26.5 million spent over the 90-day period.

How does the price compare to commercial market rates for similar volumes of cheese?

Directly comparing the price to commercial market rates is challenging without knowing the specific types and quantities of cheese procured. However, a $26.5 million expenditure over just 90 days for cheese resale suggests a very high volume or a premium product. Given the sole-source nature of the award, it is plausible that the price may be higher than what could be achieved through competitive bidding in the open market. A detailed breakdown of the cheese types and volumes would be necessary for a more accurate benchmark.

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: $26,459,588

Exercised Options: $26,459,588

Current Obligation: $26,459,588

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0109G3755

IDV Type: IDC

Timeline