We have conducted a special review of the State of Minnesota's contract with Alliant Foodservice. We conducted the review in response to a request from the Department of Administration's Materials Management Division. Alliant provides food to many state facilities, including the state correctional institutions, the regional treatment centers, and the Minnesota veterans' homes. The state paid Alliant approximately $9.8 million for food in fiscal year 1999.
Our objective in conducting this special review was to answer the following questions:
We reviewed Alliant's prices for the week of December 27, 1999, and did not find any specific instances where Alliant's state food prices deviated from the pricing methodology outlined in the 1995 contract. Alliant had documentation to support the prices it charged the state under the 1995 contract. Alliant properly applied the contract markup percentages and guaranteed bid allowances in computing the state price. Our conclusion is based solely on the pricing methodology and other explicit provisions in the 1995 contract. We did not attempt to apply any "implied" requirements or contract standards. In addition, having not found any unallowed pricing by Alliant for the week we tested, we decided not to test further.
We also decided not to test Alliant's prices further because we concluded that certain aspects of both the Department of Administration's bid process and its subsequent 1995 contract with Alliant did not ensure that the state received the best possible prices for its food purchases. We found that the department did not clearly define vendor cost as part of the request for bid process. We also found that the department did not structure its contract with Alliant to promote competition and obtain the lowest food prices possible for the state.
The Department of Administration did not adequately monitor its contract with Alliant. We found no evidence that the department verified Alliant's prices at any time during the five-year contract period. In the absence of a price audit, the department had no assurance that Alliant's sales prices were accurate and reflected the guaranteed bid allowances. In addition, the department did not monitor food price fluctuations for reasonableness. The department's reliance on state facility staff to review and question the food vendor's pricing was insufficient to ensure that the state received the best possible prices for its food purchases.