The Pentagon just announced three contracts (above, click on it to enlarge) totaling up to $7 billion for Meals-Ready-to-Eat for troops – and victims of humanitarian disasters – to eat through 2016. Sure, MREs are getting tastier, but $7 billion? We just called the folks who bought them – Philadelphia’s Defense Logistics Agency Troop Support operation — and asked what we’re getting for $7 billion (military contracts, it seems, are becoming more opaque all the time). We’ll update when we hear back.
Update: Stacey Hajdak of the Defense Logistic Agency Troop Support operation came through late Friday with a description of this deal. It’s kind of complicated, but here goes:
This is not your typical contract award so we have gone into some detail in order to explain how it works…
Background: Defense Logistics Agency awarded contracts to three vendors Nov. 16, 2011 for MREs. Bids were solicited on open competition as part of a procurement strategy to ensure competition, contingency capabilities with multiple vendors and that the government obtains the lowest overall price by having bidders submit offers on a minimum quantity share of 2.5 million cases of MREs.
DLA’s bid solicitation asked offerors to offer on a quantity share of the 2.5 million cases, with the range for the award as no more than a 50 percent share of the 2.5 million cases, and no less than 20 percent share of the 2.5 million cases for any individual supplier. The three vendors each offered pricing to gain a share of the minimum order quantity, at 50, 45, 40, 35, 30, 25, and 20 percent shares of the 2.5 million cases. The lowest overall price combination among the three offerors was awarded to the offering vendor per below.
AmeriQual Group LLC received 30% of the minimum quantity, 750,000 cases; SOPAKCO Packaging Inc. received 20% of the minimum quantity, 500,000 cases; Wornick Company received 50% of the minimum quantity, 1,250,000 cases.
After the minimum order quantity is purchased, these three vendors will again each compete on subsequent orders placed by DLA on behalf of its customers, so that the government continues to get the lowest overall price.
[Battleland asked: How many MREs does each buy?]
The solicitation was issued for a five-year minimum quantity of 2,500,000 cases and a maximum quantity of 37,500,000 cases. Each case contains 12 MRE meals.
[Battleland asked: Why didn’t they all get the same amount of money?]
This program is based on quantity, not price. Each of the three firms competed for a share of the minimum quantity which will be purchased on the first delivery orders. See above explanation for more information.
[Battleland asked: Were there only three total bidders, meaning each bidder got roughly a third of the entire order?]
Yes, three eligible offerors responded. The shares of the minimum quantities are below, with the per-case cost and total the minimum quantity cost.
AmeriQual Group LLC received 30% of the minimum quantity, 750,000 cases at $69.00 per case for a total of $51,750,000.
SOPAKCO Packaging Inc. received 20% of the minimum quantity, 500,000 cases at $82.00 per case for a total of $40,999,959.
Wornick Company received 50% of the minimum quantity, 1,250,000 cases at $53.87 per case for a total of $67,337,500.
After minimum quantities are met, subsequent awards will include price competition between the three firms to ensure the government obtains the lowest overall price. It is important to note that because awards beyond the minimum of 2.5 million cases are competed with each order, which is yet to happen, and the offer’ determine the price, we don’t yet have accurate maximum dollar value data. The maximum contract amount reported through DoD was only an estimate based on average unit price, and the possibility however unlikely, that only one firm will receive the remainder of the business.