Senator fears agencies are missing out on food contractor rebates

The government’s inconsistent and opaque policies for administering contracts for food services have produced overpayments of millions of dollars, a senator charged Wednesday.

Sen. Claire McCaskill, D-Mo., chairwoman of the Senate Homeland Security Subcommittee on Contracting Oversight, released a letter she sent to acting Budget Director Jeffrey Zients urging review of the way 14 agencies have contracted with eight food companies. She said the agreements may have denied the Treasury its share of rebate money that benefited the contractors.

The government spends $6.8 billion annually in food service contracts at military bases, agency cafeterias, national parks and courthouses, with an additional outlay of $11 billion for the National School Lunch Program.

An investigation by McCaskill’s subcommittee concluded that food service agreements under the Federal Acquisition Regulation were overly general, providing “a streamlined, almost boilerplate, approach to contracting for commercial items,” the letter said. The probe was prompted by criminal fraud lawsuits that the Justice Department previously brought against the Kuwait-based war zone dining facility contractor Public Warehousing Co.

Between 2007 and 2011, the inquiry found, contractors reported only 5 percent of the rebates agencies may have been entitled to collect. Companies mentioned included Aramark, Compass, Sodexo, PSC, Sysco, U.S. Foods and Olgoonik.

“The system isn’t working -- it’s unclear when companies are getting discounts and whether they’re required to pass those savings on to taxpayers,” McCaskill said. “It’s just another example of a complete lack of transparency and accountability in government contracting, and it needs to be resolved because it could be wasting millions of taxpayer dollars.”

The Defense Department is by far the biggest federal purchaser of food services, but the probe also covered the departments of Homeland Security, Justice, Labor, State, Treasury, Health and Human Services, Interior, Agriculture and Veterans Affairs, along with the General Services Administration and the U.S. Agency for International Development.

In asking for a review and new guidance from the Office of Management and Budget, McCaskill suggested the multiagency, bulk purchasing approach known as strategic sourcing may be appropriate for federal acquisition of food service. The Obama administration recently encouraged agencies to rely more on strategic sourcing for purchasing products and services.