DoD's $17.2M grocery contract with Quaker Oats shows limited competition and potential value concerns

Contract Overview

Contract Amount: $17,267,008 ($17.3M)

Contractor: Quaker Oats Company, the

Awarding Agency: Department of Defense

Start Date: 2009-01-01

End Date: 2009-03-31

Contract Duration: 89 days

Daily Burn Rate: $194.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE

Sector: Other

Official Description: RESALE - ASSORTED GROCERY (SECTION A)

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60661

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $17.3 million to QUAKER OATS COMPANY, THE for work described as: RESALE - ASSORTED GROCERY (SECTION A) Key points: 1. The contract awarded to Quaker Oats Company for assorted groceries represents a significant expenditure for a single supplier. 2. Limited competition for this contract raises questions about price discovery and potential overpayment. 3. The short duration of the contract (89 days) suggests it may be for immediate or short-term needs. 4. The fixed-price contract type offers some cost certainty but may not reflect market fluctuations effectively. 5. The absence of small business set-aside indicates a lack of focus on supporting smaller enterprises in this procurement. 6. The contract's value, while substantial, needs to be benchmarked against similar grocery procurements to assess value for money.

Value Assessment

Rating: questionable

Benchmarking the value of this $17.2 million contract is challenging without specific details on the 'assorted grocery' items. However, the sole-source nature of the award suggests potential for inflated pricing compared to a competitively bid scenario. The Defense Commissary Agency (DECA) typically procures goods through competitive means to ensure best value. This contract's value should be scrutinized against industry standards for wholesale grocery distribution, especially considering the limited competition.

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. This approach is typically used when only one supplier can meet the government's needs, often due to unique capabilities or existing relationships. The lack of competition means that the government did not benefit from multiple bids, which could have driven down prices and offered a wider range of options.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price. This limits the government's ability to secure the best value for public funds.

Public Impact

Military personnel and their families stationed in Illinois will benefit from the availability of assorted groceries. The contract ensures the supply of essential food items through the Defense Commissary Agency. The geographic impact is limited to Illinois, where the delivery order is being fulfilled. The contract supports the operational needs of the Defense Commissary Agency in providing goods to service members.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the 'assorted grocery' definition makes value assessment difficult.
Short contract duration may indicate a reactive procurement rather than strategic planning.
No small business participation noted, potentially missing opportunities to support smaller enterprises.

Positive Signals

Ensures availability of essential grocery items for military families.
Fixed-price contract provides some cost predictability for the government.
Awarded to a known entity (Quaker Oats), potentially leveraging existing supply chain efficiencies.

Sector Analysis

The grocery wholesale industry is characterized by large distributors and manufacturers serving diverse retail and institutional clients. The Defense Commissary Agency (DECA) is a significant player in this sector, procuring a wide range of food products for military communities. This contract, though specific to Quaker Oats, falls within the broader category of food and beverage wholesale, a mature market with established players. Benchmarking would involve comparing this contract's unit prices and overall value against other large-scale food procurements by government agencies or major retailers.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there information suggesting subcontracting opportunities for small businesses. The award to a large, established company like Quaker Oats indicates a focus on direct supply rather than fostering small business participation in this specific procurement. This could mean missed opportunities to leverage the agility and specialized services that small businesses often provide.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Commissary Agency (DECA), which is responsible for managing commissary operations and procurement. Accountability measures would include ensuring delivery of specified goods within the contract period and adherence to the fixed-price terms. Transparency is limited due to the sole-source nature and the lack of detailed public information on the specific items procured. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

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

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Limited transparency on specific goods

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.3 million to QUAKER OATS COMPANY, THE. RESALE - ASSORTED GROCERY (SECTION A)

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 $17.3 million.

What is the period of performance?

Start: 2009-01-01. End: 2009-03-31.

What specific grocery items were included in this "ASSORTED GROCERY (SECTION A)" contract, and what was the rationale for selecting Quaker Oats as a sole-source provider?

The provided data does not specify the exact grocery items included under "ASSORTED GROCERY (SECTION A)". The rationale for the sole-source award to The Quaker Oats Company is also not detailed in the available information. Typically, sole-source justifications are based on factors such as unique product availability, proprietary technology, or urgent and compelling needs where only one source can reasonably fulfill the requirement. Without further documentation, it is difficult to ascertain the precise justification. However, given Quaker Oats' product line, it is plausible this contract was for specific branded cereal, snack, or related food products that were deemed essential or uniquely available from this supplier at the time of procurement.

How does the $17.2 million contract value compare to typical annual spending on similar grocery procurements by the Defense Commissary Agency?

Comparing this $17.2 million contract value to typical annual spending requires context on the contract's duration and scope. This specific contract had a duration of only 89 days (January 1, 2009, to March 31, 2009), indicating a short-term need or a specific delivery order rather than an annual supply agreement. Annual spending by the Defense Commissary Agency (DECA) on groceries is significantly higher, often in the billions of dollars, as it encompasses a wide range of products and facilities. This $17.2 million figure, spread over less than three months, represents a substantial but likely episodic procurement rather than a baseline annual expenditure for general grocery needs. Benchmarking would necessitate understanding the specific items procured and comparing their costs against market rates for that limited period.

What were the potential risks associated with awarding this contract on a sole-source basis, and how were they mitigated?

The primary risk associated with a sole-source award is the lack of competitive pressure, which can lead to higher prices and reduced value for money. Without competing offers, the government may overpay for goods and services. Another risk is the potential for the sole-source provider to have less incentive to innovate or improve service quality. Mitigation strategies for sole-source contracts often involve rigorous price analysis, negotiation, and ensuring the justification for sole-sourcing is robust and documented. In this case, the short duration might have been a factor in the sole-source decision, perhaps for an immediate need. However, without specific details on price analysis or negotiation, the extent of risk mitigation is unclear.

What is the track record of The Quaker Oats Company in fulfilling government contracts, particularly with the Department of Defense?

The provided data indicates that The Quaker Oats Company has experience fulfilling government contracts, including this specific delivery order with the Defense Commissary Agency. While this single data point doesn't provide a comprehensive track record, it shows the company's capability to engage in government procurement. A deeper analysis would involve examining historical contract awards to Quaker Oats across various federal agencies, including contract performance ratings, any past disputes or terminations, and the types and values of contracts awarded. This would help assess their reliability, pricing competitiveness in other instances, and overall suitability for government work.

Given the contract's fixed-price nature and sole-source award, what is the likelihood that the government received competitive pricing?

The likelihood that the government received competitive pricing for this contract is low. A fixed-price contract provides cost certainty, but when awarded on a sole-source basis, there is no competitive benchmark to ensure that the fixed price is fair and reasonable. Without multiple bids, the government cannot leverage market competition to drive down costs. While the government may have conducted price analysis based on historical data or market research, the absence of competing offers inherently limits the assurance of obtaining the best possible price. Therefore, it is probable that the pricing was higher than it might have been under a fully competed contract.

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: FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

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

Address: 555 WEST MONROE STREET, CHICAGO, IL, 60661

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $17,267,008

Exercised Options: $17,267,008

Current Obligation: $17,267,008

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0104G2954

IDV Type: IDC

Timeline