DoD's $14.3M Cereal & Pop-Tarts Contract Awarded to Kellogg Company Amidst Limited Competition
Contract Overview
Contract Amount: $14,315,912 ($14.3M)
Contractor: Kellogg Company
Awarding Agency: Department of Defense
Start Date: 2009-07-01
End Date: 2009-09-30
Contract Duration: 91 days
Daily Burn Rate: $157.3K/day
Competition Type: NOT AVAILABLE FOR COMPETITION
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: Other
Official Description: RESALE - CEREAL & POP TARTS
Place of Performance
Location: BATTLE CREEK, CALHOUN County, MICHIGAN, 49017
State: Michigan Government Spending
Plain-Language Summary
Department of Defense obligated $14.3 million to KELLOGG COMPANY for work described as: RESALE - CEREAL & POP TARTS Key points: 1. Significant spending on commissary groceries highlights the scale of support for military families. 2. Sole-source award to Kellogg Company raises questions about potential price inflation and lack of competitive pressure. 3. The contract's duration and fixed-price nature suggest a predictable cost structure, but without competition, value is uncertain. 4. Focus on essential food items indicates a stable demand sector within the Defense Commissary Agency's operations.
Value Assessment
Rating: questionable
The contract value of $14.3M for a 3-month period is substantial for grocery resale. Without competitive bidding, it's difficult to assess if this price reflects fair market value compared to similar large-scale food distribution contracts.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
The contract was not available for competition, indicating a sole-source award to Kellogg Company. This lack of competition limits price discovery and potentially leads to higher costs for the government and taxpayers.
Taxpayer Impact: The absence of competition may result in taxpayers paying a premium for these essential food items, as there was no mechanism to drive down prices through bidding.
Public Impact
Military families will continue to have access to Kellogg's products through commissaries. The contract ensures a supply of popular breakfast and snack items for service members and their families. This spending contributes to the overall operational budget of the Defense Commissary Agency. The sole-source nature might set a precedent for future commissary contracts if not carefully reviewed.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition
- Potential for overpricing
- Limited transparency in price negotiation
Positive Signals
- Ensures availability of specific products
- Fixed price contract provides cost certainty (if price is fair)
Sector Analysis
The Defense Commissary Agency operates within the broader food retail and wholesale sector, providing essential goods to military personnel. Spending benchmarks for similar large-scale grocery distribution contracts are difficult to ascertain without competitive data, but $14.3M for a quarter suggests significant volume.
Small Business Impact
This contract does not appear to involve small businesses, as it is a direct award to a large corporation, Kellogg Company. There is no indication of subcontracting opportunities for small businesses within this specific award.
Oversight & Accountability
Oversight is crucial for sole-source contracts to ensure fair pricing and prevent potential waste. The Defense Commissary Agency should have internal processes to validate the necessity and cost-effectiveness of such awards.
Related Government Programs
- General Line Grocery Merchant Wholesalers
- Department of Defense Contracting
- Defense Commissary Agency Programs
Risk Flags
- Sole-source award limits price competition.
- Potential for inflated pricing due to lack of market pressure.
- Limited transparency on the justification for 'not available for competition'.
- Contract duration is relatively short, but the value is high for the period.
Tags
general-line-grocery-merchant-wholesaler, department-of-defense, mi, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $14.3 million to KELLOGG COMPANY. RESALE - CEREAL & POP TARTS
Who is the contractor on this award?
The obligated recipient is KELLOGG COMPANY.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Commissary Agency).
What is the total obligated amount?
The obligated amount is $14.3 million.
What is the period of performance?
Start: 2009-07-01. End: 2009-09-30.
What was the justification for awarding this contract on a sole-source basis?
The provided data states the contract was 'NOT AVAILABLE FOR COMPETITION,' implying a sole-source justification was likely based on factors such as unique product availability, existing relationships, or specific government requirements that only Kellogg Company could meet. A thorough review would be needed to confirm the validity and necessity of this sole-source determination.
How does the per-unit cost compare to commercially available prices for similar Kellogg's products?
Without specific product details and quantities, a direct per-unit cost comparison is challenging. However, given the sole-source nature, it is plausible that the government may not be achieving the same volume discounts or competitive pricing found in the open market. Benchmarking against commercial wholesale prices would be necessary.
What is the long-term strategy for ensuring competitive pricing in commissary grocery procurement?
The long-term strategy should involve actively seeking competitive solicitations for a wider range of commissary goods. When sole-source awards are unavoidable, robust justification and independent cost analysis are essential. Exploring alternative procurement methods and fostering market research can help identify potential competitors and encourage future bidding.
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
Address: ONE KELLOGG SQUARE, BATTLE CREEK, MI, 49016
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $14,315,912
Exercised Options: $14,315,912
Current Obligation: $14,315,912
Contract Characteristics
Commercial Item: COMMERCIAL ITEM
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: HDEC0104G2973
IDV Type: IDC
Timeline
Start Date: 2009-07-01
Current End Date: 2009-09-30
Potential End Date: 2009-09-30 00:00:00
Last Modified: 2019-06-07
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