DoD's $19.5M grocery contract with Quaker Oats shows limited competition and potential for higher prices

Contract Overview

Contract Amount: $19,482,941 ($19.5M)

Contractor: Quaker Oats Company, the

Awarding Agency: Department of Defense

Start Date: 2009-07-01

End Date: 2009-09-30

Contract Duration: 91 days

Daily Burn Rate: $214.1K/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: CHICAGO, COOK County, ILLINOIS, 60661

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $19.5 million to QUAKER OATS COMPANY, THE for work described as: RESALE - MISCELLANEOUS GROCERY Key points: 1. The contract was awarded on a non-competitive basis, raising concerns about price discovery and value for money. 2. The short duration of the contract (91 days) suggests a tactical or immediate need rather than a long-term strategic procurement. 3. The fixed-price contract type offers some cost certainty but may not fully capture potential savings from competitive bidding. 4. The absence of small business set-asides or subcontracting plans indicates a lack of focus on broader economic participation. 5. Spending on grocery wholesale is a recurring need for the Defense Commissary Agency, but this specific award lacks transparency. 6. The contract's value, while significant, needs to be benchmarked against similar wholesale grocery procurements to assess fairness.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of publicly available data on comparable wholesale grocery procurements, especially those awarded non-competitively. The fixed-price nature provides some cost control, but without competition, it's difficult to ascertain if the $19.5 million represents a fair market price. The relatively short performance period also limits the scope for long-term value assessment. Further analysis would require access to historical pricing data for similar items and quantities purchased through competitive means.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source or limited competition scenario. The specific justification for this approach is not detailed in the provided data. Typically, sole-source awards occur when only one vendor can provide the required goods or services, or in urgent situations. The lack of multiple bidders means there was no opportunity for price negotiation or comparison, potentially leading to a higher cost for the government.

Taxpayer Impact: Taxpayers may have paid a premium for these groceries due to the absence of competitive bidding. Without competing offers, the government could not leverage market forces to secure the best possible price.

Public Impact

Military personnel and their families stationed in Illinois benefit from access to groceries through the Defense Commissary Agency. The contract ensures the availability of miscellaneous grocery items, supporting the daily needs of commissary shoppers. The geographic impact is localized to Illinois, where the delivery orders were fulfilled. The contract supports the wholesale grocery distribution network, indirectly impacting jobs within that sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices for taxpayers.
Sole-source award limits transparency and accountability in pricing.
Short contract duration might indicate reactive rather than proactive procurement planning.
Absence of small business considerations misses opportunities for economic inclusion.

Positive Signals

Contract ensures essential grocery supplies for military families.
Fixed-price contract offers some predictability in expenditure.
Awarding to a known entity like Quaker Oats might ensure product quality and availability.

Sector Analysis

The wholesale grocery sector is a mature and competitive market, typically characterized by large distributors serving retail and institutional clients. Federal spending in this area, particularly through agencies like the Defense Commissary Agency, supports the logistical needs of military bases. While specific contract values can fluctuate based on demand and product mix, this $19.5 million award represents a significant, albeit short-term, procurement. Benchmarking against broader food and beverage wholesale spending by the government can provide context, but direct comparisons are difficult without detailed product breakdowns.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses, nor does it mention any subcontracting requirements. This suggests that the procurement did not actively seek to engage small businesses or leverage their participation. Consequently, the potential economic benefits for the small business ecosystem in the wholesale grocery sector were likely minimal for this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Commissary Agency (DECA) and the Department of Defense's internal procurement review processes. As a delivery order under a larger framework (though the framework type isn't specified), oversight would focus on adherence to terms, delivery schedules, and payment processes. Transparency is limited due to the non-competitive nature and lack of detailed public justification. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Commissary Agency Operations
Commissary Resale Program
Wholesale Food and Beverage Procurement
Grocery Supply Chain Management

Risk Flags

Non-competitive award
Lack of price transparency
Potential for overpayment
Limited small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.5 million to QUAKER OATS COMPANY, THE. RESALE - MISCELLANEOUS GROCERY

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 $19.5 million.

What is the period of performance?

Start: 2009-07-01. End: 2009-09-30.

What is the track record of Quaker Oats Company in securing federal contracts, particularly with the Department of Defense?

Quaker Oats Company, as a subsidiary of PepsiCo, has a history of engaging with the federal government. While specific contract details for 'The Quaker Oats Company' as a standalone entity can be limited in public databases, PepsiCo holds numerous contracts across various agencies, including the Department of Defense, for food and beverage supplies. These contracts often involve large volumes and diverse product lines, catering to military commissaries, exchanges, and other feeding operations. The nature of these awards can range from competitive bids to sole-source or emergency procurements, depending on the specific need and circumstances. Analyzing past performance would require a deeper dive into federal procurement databases like FPDS-NG or SAM.gov, filtering for PepsiCo and its subsidiaries across relevant NAICS codes related to food manufacturing and wholesale distribution.

How does the $19.5 million value of this contract compare to typical spending on miscellaneous grocery items by the Defense Commissary Agency?

The $19.5 million value for a 91-day period represents a substantial monthly expenditure of approximately $6.5 million for miscellaneous grocery items. Without a detailed breakdown of the specific items procured under 'RESALE - MISCELLANEOUS GROCERY,' direct comparison is difficult. However, the Defense Commissary Agency's overall annual sales are in the billions, serving a large population of military members and their families. This single contract, while significant for its duration, is likely a component of a larger, ongoing supply chain strategy. To assess its typicality, one would need to analyze historical spending patterns for similar 'miscellaneous grocery' categories, ideally distinguishing between competitive and non-competitive awards, and considering seasonal demand variations.

What are the primary risks associated with awarding a grocery contract of this magnitude on a non-competitive basis?

The primary risk associated with awarding a $19.5 million grocery contract on a non-competitive basis is the potential for inflated pricing. Without the pressure of competing bids, the sole-source provider, Quaker Oats Company, may not offer the most cost-effective solution. This can lead to taxpayers bearing a higher cost than necessary for these essential goods. Another risk is reduced transparency and accountability in the procurement process, making it harder to justify the expenditure. Furthermore, a non-competitive award misses the opportunity to foster competition within the broader market, potentially stifling innovation and efficiency among other suppliers. Lastly, there's a risk of over-reliance on a single supplier, which could create vulnerabilities in the supply chain if that supplier faces disruptions.

How effective is the fixed-price contract type in managing costs for wholesale grocery procurement, especially in a non-competitive scenario?

The fixed-price contract type aims to provide cost certainty by establishing a set price for the goods or services. For wholesale grocery procurement, this can be effective in shielding the government from fluctuations in market prices for raw materials or unforeseen production costs, assuming the initial price is fair. However, in a non-competitive scenario, the effectiveness is diminished. The 'fixed' price might be set at a higher baseline than what could be achieved through competition. While it prevents cost overruns due to vendor inefficiency, it doesn't guarantee value for money if the initial price wasn't rigorously benchmarked or negotiated against market alternatives. The government bears the risk if market prices fall significantly below the fixed price, while the vendor benefits from any price increases.

What are the historical spending patterns for wholesale grocery procurement by the Defense Commissary Agency, and how does this contract fit in?

The Defense Commissary Agency (DECA) consistently spends billions of dollars annually on procuring groceries and related items to support military communities worldwide. Their spending encompasses a vast array of products, from fresh produce to packaged goods, often sourced through a mix of large distributors and direct manufacturer agreements. This $19.5 million contract for miscellaneous groceries, awarded over a 91-day period in 2009, represents a specific, short-term procurement likely fulfilling immediate or localized needs within the broader DECA supply chain. Historical data would show that DECA manages numerous such contracts concurrently, with spending levels varying based on operational requirements, base populations, and strategic sourcing initiatives. This particular award, being sole-source, stands out as potentially less cost-efficient than competitively awarded contracts within DECA's overall spending portfolio.

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: Pepsico, Inc. (UEI: 001287762)

Address: 555 W MONROE ST, CHICAGO, IL, 60661

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $19,482,941

Exercised Options: $19,482,941

Current Obligation: $19,482,941

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HDEC0109G3799

IDV Type: IDC

Timeline