Peter Schorsch
Five food suppliers entered bids Wednesday for a $52 million per year contract through Florida’s Department of Corrections: Sysco, US Foods, Cheney Brothers, All American Poly, and Eastern Foods.
But there’s a problem, or actually, quite a few. Two of these companies are likely to merge. Both of them have had to settle with governments due to contracts and pricing mismanagement. And both are looking at ways to move contract-related distribution jobs out of Florida.
If Sysco completes its planned $3.5 billion purchase of U.S. Foods, the nation’s two biggest food distributors would be merged. Together, these two food giants would have about $65 billion in annual revenue, which is five times higher than their next-biggest rival.
This alone ought to give Florida’s Department of Corrections (DOC) cause for concern with selecting either of the distributors.
The state should see view this merger with the same trepidation as do restaurateurs around the country. Competition between Sysco and US Foods is seen as essential to control costs.
Scale these concerns from that of a corner deli to a state agency that purchases food by the millions, and imagine what a few dollars difference per item could mean.
But, as noted, there’s more.
According to a Jan. 7 Wall Street Journal article, just a month ago, on Dec. 18, New York reached a $330,000 settlement with US Foods over alleged violations of contracts with state and local institutions. New York’s attorney general claimed that US Foods failed to pass on discounts to public purchasers beginning in 2009.
One month prior to that, a Sysco subsidiary paid a $4.2-million settlement over allegations that it charged too much to the military for fresh produce — markups that increased food prices by 30 to 40 percent.
Two years previous, U.S Foods paid a $30-million civil settlement after the government alleged that it had used shell companies to artificially bump food prices to the Pentagon and Department of Veterans Affairs.
There’s more of the same before then, too.
In all of these cases, Sysco and US Foods have admitted no wrongdoing. In each of the cases, the food giants claim their actions were within the terms of their contracts.
But when Florida spends $52 million a year, confidence in vendors should be a little better than that.
Florida should also do right by the Governor and Legislature’s intent: to contract with companies committed to keeping and growing jobs in this state.
Sysco and US Foods have other plans.
Prior to placing its bid Wednesday, Sysco asked the Department of Corrections whether it would be allowed to use operating companies in Alabama and Mississippi as its delivery agent.
“This would result in a lower distribution fee to, due to the reduction in logistics costs,” Sysco wrote.
While logistics can be costly, Floridians out of work is costlier. Vendors with a committed Florida presence build jobs and communities and contribute to the state’s economy far beyond what may be lost by cheaper vendor labor out of state. Period.
Florida’s Department of Corrections should be wary of these issues in its selection of the state’s next correctional food vendor.
