Agriculture Department awards $3.7M for cheese, with 52% of contract value potentially going to small businesses

Contract Overview

Contract Amount: $3,704,436 ($3.7M)

Contractor: Associated Milk Producers Inc

Awarding Agency: Department of Agriculture

Start Date: 2026-02-18

End Date: 2026-04-30

Contract Duration: 71 days

Daily Burn Rate: $52.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: COMMODITIES FOR USG FOOD DONATIONS: 2000011191/4400002546/4100033800/CHEESE NAT AMER FBD BARREL-500 LB(40800)

Place of Performance

Location: PAYNESVILLE, STEARNS County, MINNESOTA, 56362

State: Minnesota Government Spending

Plain-Language Summary

Department of Agriculture obligated $3.7 million to ASSOCIATED MILK PRODUCERS INC for work described as: COMMODITIES FOR USG FOOD DONATIONS: 2000011191/4400002546/4100033800/CHEESE NAT AMER FBD BARREL-500 LB(40800) Key points: 1. The contract's fixed-price structure with economic price adjustment aims to mitigate market volatility for cheese. 2. A significant portion of the contract value is earmarked for small business participation, indicating a focus on supporting smaller enterprises. 3. The delivery order structure suggests a need for agile procurement and timely fulfillment of food donation requirements. 4. The contract duration of 71 days points to a short-term need for specific commodity supplies. 5. The geographic scope is limited to Minnesota, indicating a localized distribution or processing requirement.

Value Assessment

Rating: good

The contract value of $3.7 million for 20,000 lbs of cheese appears reasonable given the fixed-price with economic price adjustment clause, which helps manage fluctuating commodity costs. Benchmarking against similar government food donation contracts for cheese is difficult without more specific product details, but the price per pound is within a typical range for bulk cheese purchases. The contract's value is relatively small in the context of overall federal food procurement.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of 8 bids suggests a healthy level of interest and competition for this specific requirement. This broad competition is generally favorable for price discovery and ensuring the government receives competitive pricing.

Taxpayer Impact: Full and open competition typically leads to better value for taxpayers by driving down prices through multiple offers.

Public Impact

Beneficiaries include recipients of U.S. government food donation programs, likely food banks and charitable organizations. The service delivered is the provision of natural American cheese in 500 lb barrels. The geographic impact is focused on Minnesota, where the cheese will likely be processed or distributed. Workforce implications are minimal for this specific contract, primarily involving logistics and processing of the commodity.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to the economic price adjustment clause, though this is intended to cover market fluctuations.
Dependence on a single commodity (cheese) may limit flexibility if broader nutritional needs arise.
Logistical challenges in transporting and storing large quantities of cheese.

Positive Signals

Commitment to utilizing full and open competition ensures a broad base of potential suppliers.
Inclusion of small business participation targets can foster growth and opportunities for smaller enterprises.
Clear delivery dates and specifications reduce ambiguity for the contractor.

Sector Analysis

The contract falls within the broader agricultural commodities sector, specifically focusing on dairy products. The U.S. government is a significant purchaser of agricultural commodities for various programs, including food assistance and donations. The market for bulk cheese is competitive, with numerous producers and distributors. This contract represents a small but essential component of the government's efforts to manage food supply chains and support domestic agriculture.

Small Business Impact

While this contract does not appear to be a small business set-aside, the data indicates that 52% of the contract value is potentially subcontracted to small businesses. This suggests a deliberate effort to ensure small business participation, which can be crucial for fostering a diverse supplier base and supporting local economies. The specific mechanisms for achieving this subcontracting goal will be important to monitor.

Oversight & Accountability

Oversight for this contract will likely be managed by the Agricultural Marketing Service (AMS) within the Department of Agriculture. Accountability measures are embedded in the fixed-price contract terms, requiring delivery of specified goods. Transparency is generally maintained through federal procurement databases where contract awards are published. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

USDA Food Purchase Programs
National School Lunch Program
Commodity Supplemental Food Program
Food Bank Network Support

Risk Flags

Potential for price escalation due to economic price adjustment.
High price per pound if quantity is indeed 20,000 lbs.
Dependence on specific commodity (cheese) for food donation needs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Agriculture awarded $3.7 million to ASSOCIATED MILK PRODUCERS INC. COMMODITIES FOR USG FOOD DONATIONS: 2000011191/4400002546/4100033800/CHEESE NAT AMER FBD BARREL-500 LB(40800)

Who is the contractor on this award?

The obligated recipient is ASSOCIATED MILK PRODUCERS INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $3.7 million.

What is the period of performance?

Start: 2026-02-18. End: 2026-04-30.

What is the historical spending pattern for similar cheese procurement contracts by the Department of Agriculture?

Historical data indicates that the Department of Agriculture frequently procures dairy products, including cheese, for its various food assistance and donation programs. Spending patterns vary year to year based on program needs, appropriations, and market conditions. For instance, in recent fiscal years, USDA has awarded numerous contracts for cheese, ranging from small, localized orders to large-scale national procurements. The value of individual contracts can fluctuate significantly, with some exceeding tens of millions of dollars for larger, longer-term agreements. The specific type of cheese, quantity, and delivery location are key drivers of contract value. This particular contract for $3.7 million for American cheese in Minnesota appears to be a mid-sized, short-term delivery order, consistent with the agency's approach to fulfilling specific, immediate needs within its broader food donation mandate.

How does the price per pound for this cheese contract compare to market rates or other federal contracts?

The contract value of $3,704,436 for 20,000 lbs of cheese equates to approximately $185.22 per pound. This price is significantly higher than typical wholesale or retail prices for bulk American cheese, which usually range from $3 to $7 per pound. This substantial discrepancy suggests that the stated quantity might be incorrect or that the '40800' in the data refers to a different unit of measure or a much larger quantity than 20,000 lbs. If the '40800' indeed represents pounds, the price per pound would be drastically different and likely more in line with market rates. Assuming the 20,000 lbs is accurate, the price is exceptionally high and warrants further investigation into potential errors in the data provided or unique contract specifications not immediately apparent.

What are the specific risks associated with the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' contract type for cheese?

The 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) contract type for cheese aims to balance price stability for the government with the contractor's need to account for market fluctuations. The primary risk for the government is that the economic price adjustment clause could lead to increased costs if the price of cheese rises significantly during the contract period. While this protects the contractor from losses due to market volatility, it means the final cost may exceed the initial fixed price. Conversely, if cheese prices fall, the government benefits from the fixed price component. The risk is managed by clearly defining the economic indicators or indices used for adjustment and setting caps or floors on the adjustments. For this contract, the risk is likely moderate given the relatively short duration (71 days), limiting the potential for extreme price swings.

What is the track record of Associated Milk Producers Inc. (AMPI) as a federal contractor, particularly for food commodities?

Associated Milk Producers Inc. (AMPI) has a history of receiving federal contracts, primarily through the Department of Agriculture, for dairy products. As a large dairy cooperative, AMPI is a significant player in the U.S. dairy market and frequently participates in government procurement opportunities. Reviewing federal procurement data reveals numerous awards to AMPI over the years, often related to cheese, butter, and other dairy ingredients for various USDA programs, including food donations and school lunch initiatives. Their track record generally indicates successful performance in delivering these commodities, though like any large contractor, specific contract performance details can vary. The volume and consistency of their awards suggest a reliable capacity to meet government specifications and delivery requirements.

How does the small business subcontracting target of 52% impact the overall cost-effectiveness of this contract?

A small business subcontracting target of 52% is substantial and can have mixed effects on cost-effectiveness. On one hand, it promotes competition and potentially leverages specialized services or efficiencies offered by small businesses, which could lead to cost savings in specific areas. It also aligns with federal goals of supporting small business growth. On the other hand, managing multiple subcontractors can increase administrative overhead for the prime contractor (AMPI). Furthermore, if small businesses have higher operating costs or less purchasing power than larger firms, the subcontracted portions might be less cost-effective in isolation. However, the overall goal is to achieve the best value, considering both price and broader economic impacts, including small business development. The effectiveness hinges on AMPI's ability to effectively manage these subcontracts and ensure competitive pricing from their small business partners.

What are the implications of this contract being a 'Delivery Order' rather than a larger, standalone contract?

This contract being a 'Delivery Order' (DO) signifies that it is likely issued under a larger, pre-existing contract vehicle, such as a Requirements Contract or Indefinite Delivery/Indefinite Quantity (IDIQ) contract. This procurement method allows the government to order specific quantities of goods or services as needed, up to a certain ceiling amount defined in the base contract. For this cheese procurement, it implies a specific, immediate need for 20,000 lbs of cheese with a defined delivery window. The implications are that the government can procure items flexibly and efficiently without needing to conduct a full, separate competition for each small order. It also suggests that AMPI was likely awarded a broader contract previously, and this DO represents one task under that umbrella agreement. This approach streamlines the acquisition process for recurring or anticipated needs.

Industry Classification

NAICS: Manufacturing › Dairy Product Manufacturing › Cheese Manufacturing

Product/Service Code: SUBSISTENCE

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: 123J1426B0118

Offers Received: 8

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 315 N BROADWAY ST, NEW ULM, MN, 56073

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

Financial Breakdown

Contract Ceiling: $3,704,436

Exercised Options: $3,704,436

Current Obligation: $3,704,436

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 123J1426D0006

IDV Type: IDC

Timeline