USDA's $20.5M milk-exchange contract awarded to E S Foods Inc. for dairy products

Contract Overview

Contract Amount: $20,513,813 ($20.5M)

Contractor: E S Foods Inc.

Awarding Agency: Department of Agriculture

Start Date: 2009-07-20

End Date: 2010-03-31

Contract Duration: 254 days

Daily Burn Rate: $80.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: MX1U-104 ULTRA HIGH TEMPERATURE MILK-EXCHANGE

Place of Performance

Location: GRAND RAPIDS, KENT County, MICHIGAN, 49548

State: Michigan Government Spending

Plain-Language Summary

Department of Agriculture obligated $20.5 million to E S FOODS INC. for work described as: MX1U-104 ULTRA HIGH TEMPERATURE MILK-EXCHANGE Key points: 1. The contract value of $20.5 million represents a significant investment in dairy product manufacturing. 2. Competition dynamics indicate a 'full and open competition after exclusion of sources' award, suggesting a deliberate selection process. 3. Risk indicators are moderate, with a contract duration of 254 days and a firm fixed price structure. 4. Performance context is tied to the Farm Service Agency's mission, likely involving food assistance or commodity programs. 5. Sector positioning places this contract within the dairy product manufacturing industry, a key component of the agricultural supply chain.

Value Assessment

Rating: good

The contract's value of $20.5 million for dairy products appears reasonable given the scope of a federal procurement. Benchmarking against similar large-scale dairy supply contracts would provide a more precise value-for-money assessment. The firm fixed-price structure suggests that the contractor bears the risk of cost overruns, which is generally favorable for the government. However, without specific details on the quantity and type of dairy products procured, a definitive value assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'full and open competition after exclusion of sources.' This indicates that while the competition was intended to be broad, specific sources may have been excluded for defined reasons, potentially related to product specifications or prior performance. The number of bidders (2) suggests a moderately competitive environment, which can lead to price discovery but may not represent the most robust competition possible.

Taxpayer Impact: A moderately competitive award means taxpayers likely received a fair price, but a wider pool of bidders could have potentially driven prices lower.

Public Impact

Beneficiaries likely include recipients of federal food assistance programs, such as the National School Lunch Program or food banks. Services delivered involve the provision of dry, condensed, and evaporated dairy products. Geographic impact is national, as these products are typically distributed through federal supply chains. Workforce implications are within the dairy manufacturing sector, supporting jobs in production and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for limited competition due to exclusion of sources.
Price competitiveness may be impacted by only two bidders.
Ensuring product quality and timely delivery within the fixed-price contract.

Positive Signals

Firm fixed-price contract shifts cost risk to the contractor.
Awarded by the Department of Agriculture, indicating alignment with food security missions.
Contract duration of 254 days suggests a focused procurement for a specific period.

Sector Analysis

This contract falls within the dairy product manufacturing sector, a significant part of the U.S. agriculture industry. The market for dairy products is substantial, with federal procurement playing a role in stabilizing prices and ensuring supply for various programs. Comparable spending benchmarks would involve analyzing other large federal contracts for processed foods and dairy commodities, which can range from millions to hundreds of millions of dollars annually.

Small Business Impact

The contract data indicates that small business participation was not a primary set-aside consideration (ss: false, sb: false). This suggests the procurement was likely focused on large-scale manufacturers capable of meeting the volume and specifications required. There is no explicit information on subcontracting plans, but for a contract of this nature, it's possible that smaller businesses could be involved in supplying raw materials or providing logistical support.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Agriculture's Farm Service Agency. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified products. Transparency is generally provided through federal procurement databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

National School Lunch Program
Food Distribution Program on Indian Reservations
Commodity Supplemental Food Program
Dairy Price Support Program

Risk Flags

Limited competition due to exclusion of sources.
Potential for price volatility in dairy markets impacting fixed-price contract.

Frequently Asked Questions

What is this federal contract paying for?

Department of Agriculture awarded $20.5 million to E S FOODS INC.. MX1U-104 ULTRA HIGH TEMPERATURE MILK-EXCHANGE

Who is the contractor on this award?

The obligated recipient is E S FOODS INC..

Which agency awarded this contract?

Awarding agency: Department of Agriculture (Farm Service Agency).

What is the total obligated amount?

The obligated amount is $20.5 million.

What is the period of performance?

Start: 2009-07-20. End: 2010-03-31.

What is the historical spending pattern for dairy products by the Department of Agriculture?

The Department of Agriculture, particularly through its Farm Service Agency (FSA) and Food and Nutrition Service (FNS), has a long history of procuring dairy products. This spending is often tied to commodity support programs, food assistance initiatives like the National School Lunch Program, and disaster relief efforts. Annual spending can fluctuate significantly based on agricultural market conditions, legislative appropriations, and the specific needs of federal feeding programs. For instance, during periods of dairy surplus, the government may increase purchases to support farm prices. Conversely, during economic downturns, demand for food assistance may rise, leading to increased procurement. Analyzing historical data from FPDS reveals consistent, multi-million dollar annual expenditures on various dairy products, including milk, cheese, butter, and powdered milk, with specific contract values varying widely based on quantity, product type, and competition.

How does the price of this contract compare to market rates for similar dairy products?

Directly comparing the price of this $20.5 million contract to prevailing market rates for dry, condensed, and evaporated dairy products requires detailed product specifications and volume data, which are not fully available. However, the 'full and open competition after exclusion of sources' award with two bidders suggests a moderately competitive environment. If the market were highly competitive with numerous bidders, prices might be expected to be closer to marginal costs. The firm fixed-price nature shifts risk to the contractor, which can sometimes lead to a slightly higher initial price to account for that risk. Benchmarking would involve examining recent commercial sales data for comparable dairy products in bulk quantities and comparing it against the implied per-unit cost derived from this contract, considering any specific quality or packaging requirements mandated by the government.

What are the primary risks associated with this type of federal contract for dairy products?

Several risks are associated with federal contracts for dairy products. Firstly, supply chain disruptions, whether due to weather, transportation issues, or global events, can impact the contractor's ability to deliver on time and within budget. Secondly, price volatility in the dairy commodity market poses a risk, especially if the contract's fixed price does not adequately account for potential fluctuations. Thirdly, quality control is paramount; ensuring that the dairy products meet stringent federal specifications for safety, nutritional content, and shelf-life is critical. Finally, the 'exclusion of sources' aspect of the competition, while potentially justified, introduces a risk of limiting the best possible value if legitimate, capable suppliers were inadvertently or unnecessarily excluded. The firm fixed-price structure mitigates cost overrun risk for the government but places it squarely on the contractor.

What is the track record of E S Foods Inc. in fulfilling federal contracts?

To assess the track record of E S Foods Inc. for this specific contract, a review of their past performance in federal contracting databases like the Federal Procurement Data System (FPDS) is necessary. This would reveal details on previous awards, contract values, agencies served, and performance ratings, if available. A history of successful, on-time deliveries, adherence to quality standards, and competitive pricing in prior contracts would indicate a reliable contractor. Conversely, a record of contract terminations, disputes, or poor performance ratings would raise concerns. Without specific historical data on E S Foods Inc.'s performance with the USDA or other federal agencies, it is difficult to definitively assess their track record for this particular $20.5 million dairy product contract.

How does the contract duration of 254 days impact the overall value and risk?

A contract duration of 254 days (approximately 8.5 months) for a $20.5 million procurement suggests a focused, relatively short-term supply requirement rather than an ongoing, long-term commitment. This shorter duration can reduce certain risks, such as the potential for significant market price fluctuations over extended periods or the need for continuous adaptation to changing program requirements. For the government, it allows for more frequent re-competition, potentially capturing better pricing or updated product specifications in subsequent awards. For the contractor, it means a defined period of revenue and a clear endpoint, simplifying resource allocation. However, it also necessitates efficient production and delivery schedules to meet the contract's obligations within the specified timeframe, potentially increasing logistical pressure.

Industry Classification

NAICS: Manufacturing › Dairy Product Manufacturing › Dry, Condensed, and Evaporated Dairy Product Manufacturing

Product/Service Code: SUBSISTENCE

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SEALED BID

Solicitation ID: MX1U-104

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 20 CROSSWAYS PARK DR N, WOODBURY, NY, 03

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

Financial Breakdown

Contract Ceiling: $20,513,813

Exercised Options: $20,513,813

Current Obligation: $20,513,813

Contract Characteristics

Cost or Pricing Data: NO

Timeline