USDA awards $3.46M for cheese to Associated Milk Producers Inc., highlighting a fixed-price contract with economic adjustments

Contract Overview

Contract Amount: $3,463,267 ($3.5M)

Contractor: Associated Milk Producers Inc

Awarding Agency: Department of Agriculture

Start Date: 2026-04-01

End Date: 2026-06-30

Contract Duration: 90 days

Daily Burn Rate: $38.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: COMMODITIES FOR USG FOOD DONATIONS: 2000011246/4400002546/4100033943/CHEESE NAT AMER FBD BARREL-500 LB(40800)

Place of Performance

Location: PAYNESVILLE, STEARNS County, MINNESOTA, 56362

State: Minnesota Government Spending

Plain-Language Summary

Department of Agriculture obligated $3.5 million to ASSOCIATED MILK PRODUCERS INC for work described as: COMMODITIES FOR USG FOOD DONATIONS: 2000011246/4400002546/4100033943/CHEESE NAT AMER FBD BARREL-500 LB(40800) Key points: 1. The contract value of $3.46 million for cheese procurement suggests a significant volume of product is being acquired. 2. Associated Milk Producers Inc. is the sole awardee, raising questions about the breadth of competition for this specific order. 3. The fixed-price structure with economic price adjustment introduces potential for cost fluctuations based on market conditions. 4. The contract duration of 90 days indicates a short-term need for these commodities. 5. The award falls under the 'Cheese Manufacturing' NAICS code, aligning with agricultural supply chain activities. 6. The absence of small business set-aside flags suggests this was not specifically targeted to smaller enterprises.

Value Assessment

Rating: fair

The award of $3.46 million for cheese, while substantial, lacks direct comparative contract data to definitively assess value for money. The fixed-price with economic price adjustment (FPEPA) contract type introduces a degree of uncertainty in the final cost. Benchmarking this specific award against similar large-volume cheese procurements for food donations would provide a clearer picture of its cost-effectiveness. Without such comparisons, it's difficult to ascertain if the pricing is competitive or if potential savings were missed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, the data provided does not specify the number of bids received. A high number of bidders typically suggests robust competition, which can lead to more favorable pricing for the government. Conversely, if only a few bids were submitted despite full and open competition, it might suggest market limitations or specific requirements that narrowed the field.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it aims to secure the best possible prices through a wide range of offers. However, the ultimate benefit depends on the actual level of participation and the resulting price competitiveness.

Public Impact

Beneficiaries include individuals and families receiving food assistance through USDA donation programs. The service delivered is the provision of 500 lb barrels of American Natural Cheese. The geographic impact is primarily within the United States, supporting domestic dairy producers and food distribution networks. Workforce implications are indirect, supporting jobs within the dairy processing and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the economic price adjustment clause in a volatile commodity market.
Limited visibility into the number of actual bidders under 'full and open competition' could mask a lack of robust market engagement.
Short contract duration (90 days) may lead to less favorable pricing compared to longer-term commitments.

Positive Signals

Award to a known entity (Associated Milk Producers Inc.) suggests familiarity with their capabilities.
Fixed-price element provides some cost certainty, with adjustments only for specified economic factors.
Procurement through established USDA food donation channels ensures alignment with federal nutrition assistance goals.

Sector Analysis

This contract falls within the broader agricultural and food manufacturing sector, specifically focusing on dairy products. The market for commodity cheese is influenced by global supply and demand, feed costs, and government agricultural policies. The USDA is a significant purchaser of dairy products, often for domestic food assistance programs and international food aid. Comparable spending benchmarks would involve analyzing other large-scale cheese procurements by government agencies or large food service providers.

Small Business Impact

The contract data indicates that this award was not set aside for small businesses (ss: false, sb: false). This suggests that the procurement was open to businesses of all sizes, and Associated Milk Producers Inc., a large cooperative, was selected. There is no explicit mention of subcontracting requirements for small businesses within the provided data. Therefore, the direct impact on the small business ecosystem for this specific award appears minimal, though the overall scale of the contract might indirectly support smaller suppliers within the cooperative's network.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Agriculture's Agricultural Marketing Service (AMS), which awarded the contract. Accountability measures are embedded in the contract terms, including delivery schedules and product specifications. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

USDA Food Purchase for Distribution
National School Lunch Program
Commodity Supplemental Food Program
Food Pantries and Shelters Support

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Limited Competition Visibility

Frequently Asked Questions

What is this federal contract paying for?

Department of Agriculture awarded $3.5 million to ASSOCIATED MILK PRODUCERS INC. COMMODITIES FOR USG FOOD DONATIONS: 2000011246/4400002546/4100033943/CHEESE NAT AMER FBD BARREL-500 LB(40800)

Who is the contractor on this award?

The obligated recipient is ASSOCIATED MILK PRODUCERS INC.

Which agency awarded this contract?

Awarding agency: Department of Agriculture (Agricultural Marketing Service).

What is the total obligated amount?

The obligated amount is $3.5 million.

What is the period of performance?

Start: 2026-04-01. End: 2026-06-30.

What is the historical spending pattern for cheese procurement by the USDA for food donation programs?

Analyzing historical spending data for cheese procurement by the USDA reveals a consistent need for dairy products to support food assistance initiatives. Over the past five fiscal years, the USDA has allocated significant funds towards acquiring cheese for various donation programs, including those serving schools, food banks, and vulnerable populations. Spending has fluctuated based on appropriations, program needs, and commodity market prices. For instance, periods of increased agricultural surplus or heightened food insecurity have often correlated with higher procurement volumes and associated expenditures. The average annual spending on cheese for these programs typically ranges in the tens of millions of dollars, with individual contract values varying widely based on quantity, type of cheese, and duration. Associated Milk Producers Inc. has historically been a significant supplier in this market, securing multiple awards over the years, indicating a strong existing relationship and established capacity to meet USDA requirements.

How does the price of cheese in this contract compare to market rates at the time of award?

Determining the precise price comparison requires access to real-time market data for American Natural Cheese (barrel-500 lb) during the award period (estimated around Q2 2026, based on the contract end date). However, the contract's 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause suggests that the base price was negotiated, with provisions for adjustments based on specific economic indicators. To benchmark, one would compare the base price per pound against average wholesale prices reported by sources like the USDA's Agricultural Marketing Service (AMS) Dairy Market News or indices from commodity exchanges. If the FPEPA clause allows for significant upward adjustments, the final cost could exceed initial market expectations. Without the specific base price and adjustment formula, a definitive comparison is challenging, but the structure implies a negotiation aimed at balancing cost certainty with market volatility.

What is the track record of Associated Milk Producers Inc. in fulfilling government contracts, particularly for dairy products?

Associated Milk Producers Inc. (AMPI) has a substantial track record of fulfilling government contracts, particularly within the dairy sector. As a large dairy cooperative, AMPI has consistently been a key supplier to federal agencies, including the USDA, for various dairy products. Publicly available contract data indicates numerous awards to AMPI over the years for milk, cheese, butter, and other dairy commodities, often through competitive bidding processes. Their performance history generally reflects an ability to meet delivery schedules and product specifications required by government solicitations. While specific performance metrics for every contract are not always public, their continued success in securing significant government awards suggests a reliable operational capacity and a history of satisfactory performance. Any potential concerns would likely be detailed in specific contract close-out reports or agency performance evaluations, which are not readily accessible in this summary data.

What are the potential risks associated with the economic price adjustment clause in this contract?

The primary risk associated with the economic price adjustment (EPA) clause in this contract is the potential for cost escalation beyond the initially budgeted amount. While EPA clauses are intended to account for legitimate fluctuations in input costs (like feed, energy, or labor), they can lead to higher final contract prices if market conditions trend upwards significantly during the contract period. For the government, this introduces budget uncertainty and the possibility of paying more than anticipated. For the contractor, it mitigates the risk of losses due to unforeseen cost increases. The specific risk level depends heavily on the chosen economic indicators used for adjustment and the volatility of those indicators. If the indicators are broad or prone to rapid change, the government could face substantial price increases, potentially impacting the overall value for money achieved.

How does the duration of this contract (90 days) impact its overall effectiveness and cost?

The short duration of this contract, set at 90 days, suggests a specific, time-bound need for the cheese, likely related to immediate distribution requirements or inventory management within a particular food donation cycle. From a cost perspective, shorter contracts can sometimes command higher per-unit prices compared to longer-term agreements, as contractors may not offer volume discounts or efficiencies associated with sustained production planning. However, for the government, a short duration offers flexibility and reduces the commitment period, allowing for quicker adaptation to changing needs or market conditions. It also limits the exposure to long-term price volatility. The effectiveness hinges on whether the 90-day supply adequately meets the program's immediate objectives without necessitating rapid, potentially more expensive, follow-on procurements.

Industry Classification

NAICS: Manufacturing › Dairy Product Manufacturing › Cheese Manufacturing

Product/Service Code: SUBSISTENCE

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: 123J1426B0118

Offers Received: 8

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 315 N BROADWAY ST, NEW ULM, MN, 56073

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $3,463,267

Exercised Options: $3,463,267

Current Obligation: $3,463,267

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 123J1426D0006

IDV Type: IDC

Timeline