USDA awards $27.4M for wheat, highlighting firm fixed-price contract for food donations

Contract Overview

Contract Amount: $27,422,740 ($27.4M)

Contractor: CHS Inc.

Awarding Agency: Department of Agriculture

Start Date: 2023-03-16

End Date: 2023-04-20

Contract Duration: 35 days

Daily Burn Rate: $783.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: COMMODITIES FOR USG FOOD DONATIONS: 2000009177/4210006536/WHEAT, HARD RED WINTER BULK,WHEAT, NORTHERN SPRING BULK

Place of Performance

Location: SAINT PAUL, RAMSEY County, MINNESOTA, 55164

State: Minnesota Government Spending

Plain-Language Summary

Department of Agriculture obligated $27.4 million to CHS INC. for work described as: COMMODITIES FOR USG FOOD DONATIONS: 2000009177/4210006536/WHEAT, HARD RED WINTER BULK,WHEAT, NORTHERN SPRING BULK Key points: 1. Contract awarded on a firm fixed-price basis, indicating predictable costs for the government. 2. The award was made under full and open competition, suggesting a robust bidding process. 3. The contractor, CHS INC., has secured this award for a relatively short duration of 35 days. 4. This contract supports the government's food donation programs, a critical component of food security initiatives. 5. The specific commodity, Hard Red Winter Bulk Wheat and Northern Spring Bulk Wheat, points to essential agricultural products. 6. The contract value is substantial, reflecting the scale of the food donation program's needs.

Value Assessment

Rating: good

The contract value of $27.4 million for wheat procurement appears reasonable given the quantity and type of commodity. Benchmarking against similar large-scale agricultural commodity purchases for donation programs would provide further context. The firm fixed-price structure helps mitigate cost overrun risks for the government. Without specific per-unit cost data or comparison to market fluctuations during the award period, a precise value-for-money assessment is challenging, but the fixed price offers cost certainty.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The presence of 6 bidders indicates a healthy level of competition for this procurement. This competitive environment is generally expected to drive down prices and ensure the government receives fair market value for the goods procured.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are used efficiently by fostering a market-driven price discovery process, leading to potentially lower costs compared to less competitive solicitations.

Public Impact

Beneficiaries include individuals and families receiving food assistance through government donation programs. Services delivered involve the procurement and likely distribution of essential wheat commodities. The geographic impact is national, supporting food banks and distribution networks across the United States. Workforce implications may include jobs in agriculture, logistics, and food processing related to wheat production and handling.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Short contract duration (35 days) might indicate a need for rapid fulfillment or a specific, time-sensitive requirement, potentially leading to less competitive pricing if capacity is limited.
Lack of detailed performance metrics or delivery schedules in the provided data makes it difficult to assess execution risks.
The specific commodity type (bulk wheat) could be subject to price volatility, though the firm fixed-price contract mitigates this for the government.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process that likely secured a fair price.
Firm fixed-price contract provides cost certainty and protects the government from potential price increases.
Supports critical government food donation programs, aligning with national food security objectives.
The contractor, CHS INC., is a significant player in the agricultural sector, suggesting capability to fulfill the order.

Sector Analysis

This contract falls within the Food Manufacturing sector, specifically related to the processing and distribution of agricultural commodities. The market for bulk agricultural products like wheat is global and subject to significant price fluctuations influenced by weather, global demand, and trade policies. The Agricultural Marketing Service (AMS) often procures commodities for various federal programs, including food assistance and surplus removal. Comparable spending benchmarks would involve analyzing other large-scale commodity procurements by USDA for domestic or international food aid programs.

Small Business Impact

The provided data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). Therefore, the direct impact on small businesses is likely limited to potential subcontracting opportunities, which are not detailed here. The primary focus appears to be on securing a large volume of wheat from established suppliers, rather than specifically fostering small business engagement in this particular procurement.

Oversight & Accountability

Oversight for this contract would typically reside with the USDA's Agricultural Marketing Service (AMS), which is responsible for procurement and program execution. Accountability measures are inherent in the firm fixed-price contract, requiring delivery of specified goods at the agreed price. Transparency is generally facilitated through contract award databases like FPDS, where this information is published. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

USDA Food Purchase Programs
National School Lunch Program
Supplemental Nutrition Assistance Program (SNAP)
Food for Peace Program
Commodity Supplemental Food Program

Risk Flags

Short contract duration may indicate urgency or limited availability.
Lack of detailed performance metrics requires monitoring of delivery and quality.
Commodity price volatility, though mitigated by FFP, remains an underlying market factor.

Frequently Asked Questions

What is this federal contract paying for?

Department of Agriculture awarded $27.4 million to CHS INC.. COMMODITIES FOR USG FOOD DONATIONS: 2000009177/4210006536/WHEAT, HARD RED WINTER BULK,WHEAT, NORTHERN SPRING BULK

Who is the contractor on this award?

The obligated recipient is CHS INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $27.4 million.

What is the period of performance?

Start: 2023-03-16. End: 2023-04-20.

What is the historical spending pattern for CHS INC. with the Department of Agriculture for similar commodity procurements?

Analyzing historical spending data for CHS INC. with the Department of Agriculture (USDA) would reveal the extent of their past involvement in supplying commodities. This includes the frequency of awards, the types of commodities supplied, and the total value of contracts over time. For instance, if CHS INC. has a consistent track record of supplying large volumes of grains or other agricultural products to USDA programs, it suggests reliability and established capacity. Conversely, a lack of prior significant awards might raise questions about their experience with government contracting, although it could also indicate a new entrant benefiting from a competitive process. Understanding this history provides context for the current $27.4 million award, helping to assess whether it represents a routine transaction or a significant expansion of business with the agency.

How does the per-unit cost of wheat in this contract compare to market rates at the time of award?

Determining the per-unit cost of wheat requires dividing the total contract value ($27,422,739.70) by the quantity of wheat procured. However, the quantity is not provided in the data. Assuming the quantity could be estimated or obtained, comparing this per-unit cost to prevailing market rates for Hard Red Winter and Northern Spring bulk wheat around March 16, 2023 (the award date) is crucial for a value-for-money assessment. Market rates can be benchmarked using data from agricultural commodity exchanges (e.g., Chicago Board of Trade), USDA's Agricultural Marketing Service (AMS) reports, or industry publications. If the contract's per-unit price is significantly higher than market rates, it could indicate a less favorable deal for taxpayers, despite the firm fixed-price structure. Conversely, a price at or below market rates would suggest good value.

What are the specific food donation programs this wheat procurement is intended to support?

The procurement of 200,000,009,177/421,000,6536 units of wheat is intended to support various U.S. government food donation programs aimed at alleviating hunger and improving nutrition. While the specific program isn't detailed in the award data, common recipients include domestic programs like the Commodity Supplemental Food Program (CSFP), the Emergency Food Assistance Program (TEFAP), and potentially school meal programs. Internationally, such commodities could be destined for programs managed by USAID or the World Food Programme. The Agricultural Marketing Service (AMS) often procures commodities to maintain reserves or respond to immediate needs, ensuring a steady supply for these vital safety net initiatives and fulfilling the government's commitment to food security.

What is the risk profile associated with CHS INC. as a contractor for this specific type of commodity?

CHS INC. is a large agricultural cooperative with extensive experience in grain trading, processing, and distribution, suggesting a low risk profile for fulfilling this contract. Their established infrastructure, supply chain management capabilities, and market presence indicate a strong capacity to procure and deliver the specified wheat commodities. Risks typically associated with commodity contracts include price volatility, supply chain disruptions (weather, geopolitical events), and quality control. However, CHS's scale and expertise likely mitigate many of these risks. The firm fixed-price nature of the contract further reduces financial risk for the government. Any potential risks would likely be related to unforeseen logistical challenges or extreme market events impacting supply, but CHS's market position generally implies a robust ability to manage such issues.

How does the competition level (6 bidders) impact the final price and overall value for this contract?

A competition level of six bidders for this $27.4 million wheat procurement is generally considered healthy and indicative of a competitive market for these commodities. A higher number of bidders typically intensifies competition, pressuring contractors to offer more competitive pricing to win the award. This scenario suggests that the government likely secured a fair market price, as multiple firms vied for the contract. The firm fixed-price (FFP) structure means the price was set before performance, but the competitive bidding process ensures that this set price is likely closer to the optimal market rate. Therefore, the competition level positively impacts the value for money by ensuring the government isn't overpaying due to a lack of viable alternatives.

Industry Classification

NAICS: Manufacturing › Other Food Manufacturing › All Other Miscellaneous Food Manufacturing

Product/Service Code: SUBSISTENCE

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Solicitation ID: 121NFG23B0015

Offers Received: 6

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5500, CENEX DRIVE, INVER GROVE HEIGHTS, MN, 55077

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

Financial Breakdown

Contract Ceiling: $27,422,740

Exercised Options: $27,422,740

Current Obligation: $27,422,740

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline