It was mostly with disbelief that longtime industry members reacted to the May rollout of the U.S. Department of Agriculture’s $1.2 billion private-public program to purchase food from the nation’s farmers and deliver it to the neediest.
While the concept of helping two groups of people hit hard by the coronavirus pandemic was applauded, the execution wasn’t well received.
On May 8, the USDA’s Agricultural Marketing Service announced the dozens of companies that would be providing free food boxes to millions of recipients across the nation under the Farmers to Families Food Box Program. The list included some well-known agricultural product suppliers, but many on the list were unknown entities with no previous connection to the industry and/or no established infrastructure to carry out the contracts they were awarded. Approximately $400 million of the funds were earmarked for boxes filled with produce.
Tom Stenzel, president and CEO of the United Fresh Produce Association, swiftly fired off a letter to AMS Administrator Bruce Summers applauding the effort and the speed in which AMS solicited and awarded bids. However, he noted that many of his association’s members that were denied contracts were concerned about the process and the criteria used to determine the “winners.”
Stenzel said his inquiry was not “sour grapes” but a genuine concern about the process and the factors involved in determining the contract awardees.
“We know of several upstanding companies that are current government contractors to USDA and the DOD (Department of Defense) Fresh program who were seemingly denied on mistaken grounds,” he said.
Stenzel included a list of 15 questions the industry wanted to see answered. Most asked about transparency concerning the awarding of the contracts and clarity in the criteria used. Stenzel also asked the USDA to “rectify” clear cases of errors “and award those bids now.”
One of those questions involved the apparent lack of requirement that the produce supplier awardees have a PACA license. “Did USDA require that awardees be PACA-licensed produce dealers in good standing,” he asked. “If not, why not, and how can USDA ensure that non-licensees fulfill the requirements of PACA?”
Stenzel also questioned the fulfillment process as he noted that some United Fresh members were receiving requests to be subcontractors from awardees “without their own warehouse, staff and distribution ability.”
The letter also got down to the nuts-and-bolts of the decision process as Stenzel asked Summers to explain how some awardees received contracts though they did not appear to fit the baseline criteria including having “historical experience” in the endeavor.
A week later, on May 15, Stenzel released the contents of a second letter to Summers signed by both he and Cathy Burns, CEO of the Produce Marketing Association. It had a much more conciliatory tone noting that produce was starting to be delivered “fulfilling exactly what the Department and the Administration had hoped to see.”
However, the letter still acknowledged the initial missteps and suggested that AMS work more closely in the future “on any adjustments in the program or process for evaluation of success.”
Many members of the industry were not as conciliatory in their tone. A number were incredulous about the lack of a requirement that awardees of the produce contracts did not have to even have the base minimum of a PACA license. It is the ticket to perform in the fresh produce industry. Without it, you can’t get in the door.
Denny Donovan, sales manager for Fresh Kist Produce LLC in Santa Maria, CA, noted that there are few companies on the list of awardees that he has heard of or that are in the Blue Book, the industry’s directory of licensees and bible for credit worthiness.
“I was disheartened,” he said. “I was hoping to see customers that I could call nationwide that had been awarded contracts related to fresh produce.”
Donovan, a longtime veteran who knows the buyer community very well, said only one of the two dozen contracts over $10 million was awarded to what he called a “farmer-type company. I was hoping to make some calls and sell California vegetables. Our farmers have been selling below production costs and disking unharvested fields for many weeks now.”
Two weeks into the program, Donovan said he is starting to get calls about selling product for the box program, but they are mostly “coming from buying brokers we already deal with. And their goal is to buy as cheap as possible. They are not worried about our farmers making money or not.”
While he originally thought the name of the program was awesome, Donovan said, “Farmers to Families does not sound that appropriate now. Hopefully part of this $1.2 billion program does eventually trickle down to our farmers.”
Marvin Quebec, president of Quebec Distributing Co. in Oakland, CA, applied for the program “but we didn’t get a sniff,” which he said does not upset him at all.
“I went through the application and because of other business affiliations, it appeared we wouldn’t qualify,” said Quebec. “But I know many other distributors, especially foodservice distributors, that would have been perfect, and they were denied as well.”
Quebec quickly went down the list of winners during the interview for this story, pointing out the ones with legitimacy in the produce industry and those that have no clue what they are doing and probably won’t be able to perform.
One that caught Quebec’s attention was CRE8AD8 (pronounced create a date), a San Antonio, TX, event planner that received a $39 million contract. In a story in the San Antonio newspaper, the company’s CEO, Gregorio Palomino, was quoted as saying he was surprised to be a winning bidder and acknowledged that he had no produce experience but didn’t think that was an impediment to performing the contract.
“We knew that we easily could do this because instead of putting tchotchkes in a bag that is going to go to a conference attendee, this is the same exact thing except it’s just food going into a box,” Palomino was quoted as saying.
That response bothered Michael (Nando) Gonzales, a partner and sales manager in the family-run River City Produce Co. Inc., also in San Antonio. “Respect our business,” he said. “It’s not the same thing.”
River City was an unsuccessful bidder for the program but Gonzales said he was not bitter about that. He said losing bids is part of the process and, on its face, is not a reason to get upset. “Someone kicks your ass. You learn by it and do better next time.”
But in this instance, Gonzales believes the government got it wrong. “There were 500 bidders, but this is a big program and we figured everyone would get a little piece of it. We thought it was a great program that would help our industry and we could get a little bit of business and help our community at the same time”
River City put in a modest bid to deliver 1,500 boxes per week over the first six weeks of the program. “We’re a large wholesaler; we could do a lot more but there are many other wholesalers -- friends and competitors of ours -- that lost 80 to 90 percent of their business overnight. We thought this would be spread around.”
Instead, a San Antonio firm with no ties to produce received a $39 million contract. “I don’t fault that company. They are just trying to make a living and I’m sure they want to do a good job. But respect our business,” he reiterated.
Gonzales said dealing with fresh produce requires paying attention to many food-safety regulations. It’s doubtful, he indicated, that an event planner would have that expertise on staff.
In the press report, Palomino said he was in the process of applying for a PACA license, which the USDA has reportedly announced is necessary.
Matthew McInerney, a longtime PACA expert, who retired from the Western Growers Association in early 2019, said the application process is an easy one and he likened it to getting a driver’s license, though a driver’s license at least requires the passing of a test.
McInerney said PACA licenses are routinely granted proving the applicant has not held a senior position in a produce company that has committed PACA violations and not paid judgments. But as he counseled WGA members during his 40-year career, a license is not a guarantee of payment or performance. In fact, other than issuing a monetary decision in a dispute and yanking a license, the provisions of PACA give the USDA very few tools to enforce the law.
McInerney believes producers should only sell produce to a licensee and the seller should still be using the Blue Book to get a good gauge on the pay practices of the potential buyer as well as their reputational rating in the industry. He noted that new licensees with no history in the industry would have no track upon which sellers could rely.
