School Dept. Food Fight Looms

When the New York City Department of Education decided last year to give just three companies the job of delivering food to all its schools, the idea was to simplify its system and to save money on running the second-largest feeding program in the United States (only the military is bigger). In practice, the plan's performance been anything but simple, with delays in deliveries, steep fines to the distribution companies, and a declared emergency that brought in extra delivery firms. Now, the DOE is trying to stabilize the system with a new request for companies to bid on delivering food. But that hasn't been simple either.

The DOE has temporarily withdrawn that request for proposals for three areas now covered by emergency contracts. At the same time, the city comptroller's office has begun asking questions about the way the new system has performed. And the DOE could end up in court with one vendor—Louis Foods, which withdrew from its contract this summer because it was losing too much money—that may have been overpaid more than a million dollars.

"It's just basically out of control," says Joel Warshaw of Louis Foods, which like other vendors paid tens of thousands in fines for late deliveries, before getting out. "There's nothing illegal going on. It's just a matter of incompetence, gross incompetence." He cited the short ramp-up time vendors were given, problems in paying food manufacturers, and flaws in the computer program the DOE used to manage the plan. "They've held back over a million dollars and they're saying that we owe them the majority of that money because they overpaid us," Warshaw says, adding that Louis had to destroy "a couple of hundred thousand dollars worth of merchandise" and lay people off because of the problems.

Kelly Devers, a spokeswoman for the DOE, says the new bid is being finalized and approved by lawyers and should be out soon; a new computer tracking system is being readied for deployment in February. She adds that service to the schools does not appear to have been affected by delivery woes this year (Last year, there were problems at several schools).

But what about saving money? Last spring, school food officials insisted that their new delivery plan—the result of a multimillion-dollar contract with the consultancy Accenture—would still save the city money despite the snafus. Of course, developing the new computer program and the other fixes might offset those savings somewhat. Even if the city does end up in the black, Warshaw thinks his fellow vendors are seeing red. "They're losing their shirts," he says.

The comptroller's office did not characterize its inquiries as an investigation; spokeswoman Laura Rivera says the office is only collecting information at this point.

Meanwhile, the revised bid is due out soon. Why the delay? "They just really want to make sure they got it right," Devers says.

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