Union: Rising costs built into $1.2 billion Marine Corps food contract

As the largest-ever domestic military food service deal swelled to $1.2 billion, the Marine Corps failed to restructure its contract with France-based catering company Sodexo to cut escalating costs, according to new allegations from the Service Employees International Union.

Contract modifications obtained by the union through the Freedom of Information Act were heavily redacted, but offer a hint of how growing expenses were built into an eight-year contract bundle that outgrew its original price tag of $881 million by 36 percent.

The documents show that mess hall services at West Coast bases were modified at least 36 times between 2003 and 2009 to increase contractor duties and incorporate more requests for equitable adjustment.

Menu revisions that became effective in 2002 increased target costs, profit and price per meal.

After undefinitized provisions -- clauses allowing contractors to begin work before a dollar figure is inked -- were introduced in the original contract, two more undefinitized sums were allowed into the contract in 2004.

Supporters of undefinitized provisions defend them as a way to give contractors the flexibility to find the best solutions for clients. But they also are considered risky contract vehicles because "contractors lack incentives to control costs while contract terms and conditions are negotiated and definitized," said a 2010 Government Accountability Office report on use of undefinitized contract actions.

The Defense Department's obligations for undefinitized contract actions increased from $5.98 billion in 2001 to $6.53 billion in 2005.

A 2006 modification was designed to recompense Sodexo for an "increased fixed cost per meal determined to be otherwise unrecoverable" because of "a significant shortfall in meal count as a result of reduced mess hall patronage" when Marines deployed overseas.

The Marine Corps chose to "negotiate minor fixes rather than cancel or fundamentally restructure the acquisition," Josh Glasstetter, the union's representative wrote in a blog entry, adding that the government liability to terminate the contract was capped at $10 million per contract within the five non-option years.

SEIU timed its statement to coincide with Sodexo's release of its first quarterly earnings, and in the lead-up to the outcome of the company's bid to renew its military food service contract, which ends Jan. 31.

"The increased costs referred to by the SEIU are primarily due to Sodexo responding to [Marine Corps]-requested changes," Sodexo spokeswoman Stacy Bowman-Hade said in an e-mail statement, adding that new expenses are "not an unusual occurrence under a government contract."

She added that the cost increases also were related to factors such as inflation adjustments, wage changes directed by the Labor Department and collective bargaining agreements, as well as small business participation.

The union's allegations are "part of an ongoing smear campaign that attempts to force Sodexo to let [SEIU] represent our 125,000 U.S. employees," Bowman-Hade also said, when in fact, "Sodexo has enjoyed a positive and productive working relationship with the U.S. Marine Corps." The Marine Corps did not respond to a request for comment.

Rep. Loretta Sanchez, D-Calif., requested in April 2010 that GAO investigate Sodexo for excessive waste and food safety issues in its contract with the Marine Corps.

The Agriculture Department reported 70 instances of food safety violations between December 2005 and September 2009 at a Tennessee processing plant where Marine-related food operations were located. These operations were terminated in 2007 when another vendor was selected to fulfill that part of the contract.

Dawn Lim is an occasional contributor to Government Executive and Nextgov.com.

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