Trump's signature effort to direct farm surplus to needy families abruptly withdraws large contract amid criticism of program's rollout

Contracts totaling more than $107 million went to a San Antonio event planner, an avocado mail-order company, a health-and-wellness airport kiosk company and a trade finance corporation, according to the Agriculture Department's announcement of contract awards.

But the USDA bypassed the country's three largest food distribution companies as well as nonprofit organizations with long histories of feeding the poor on a large scale, according to Tom Stenzel, president of the United Fresh Produce Association.

California Avocados Direct received $40 million to supply fresh fruit and vegetables across nine states. The firm said it would need to pave a new road to its facility in Escondido, buy three cargo containers and hire 130 people to start delivering the boxes. "I thought it would be fun to move 1 million boxes," chief executive Ben Holtz said in a phone interview. "A million sounds kind of cool, and they said all right. Next week will be 100,000 boxes, then the next week will have to approach 200,000."

On Wednesday, Holtz heard that his contract had been canceled with little explanation.

"It feels like a giant prank," Holtz said by phone Friday morning. "The contract was only 7 weeks from start to finish, for $40 million. And I kicked my butt to get this going. There are a lot of hungry people and there are 60 food banks calling me for delivery. I'd already sent out lots of food."

"During post-award reviews of RFP submissions, if information arises that affects the evaluation of the proposal the government may take several actions," the USDA wrote in a statement about the cancellation. "Consistent with the solicitation terms, and based on post-award information, a Stop Work Order could be issued to consider the effects of the information on the award decision."

The USDA declined to comment on whether other contracts had been, or will be, canceled. A number of others are moving forward for vendors experts say are inexperienced in this form of food distribution.

CRE8AD8 LLC (pronounced "Create A Date"), a minority-owned San Antonio-based company that has done food preparation for the Sundance Film Festival, received $39.1 million to supply boxes of fresh produce, dairy and precooked meat to food banks in Texas. The company said it would need to hire 125 people for the project. "This is the largest contract we have won to date," said chief executive Gregorio Palomino.

Yegg, Inc., an export management, trading and trade finance company in Manhattan Beach, California, received a $16.5 million contract to supply boxes of dairy products. The chief executive, George Egbuonu, is the author of a book called "How to Get a Job in 30 Days or Less" and has also been involved in a company that produces virtual-reality e-cards. "Our priority at the moment is working with dairy farmers in California to source and distribute the dairy boxes and milk products to the hundreds of food banks as soon as possible," wrote Michelle Thompson, a sales and marketing representative for Yegg, in an email.

Travel Well Holdings, a Santa Rosa, California company that makes wellness products for airport kiosks, received a contract for $12.2 million to make fruit and vegetable boxes. "In collaboration with other small businesses, we have created a unique supply chain in support of our farmers and to serve those in need," Desiree Rodriguez, the company's chief executive, said in an email. "The process has been inspiring to all involved. Right now our focus is on delivering this generous provision from the USDA."

The USDA bypassed the country's three largest food distribution companies as well as nonprofit organizations with long histories of feeding the poor on a large scale, according to Stenzel.

"The majority of contracts are good. We think about 80% on the produce side are legitimate produce companies and will do a good job at getting produce to people in need. We have questions about the others. There are some egregious examples," Stenzel said in an interview. "We have to get the produce to the food banks immediately in consumer-friendly packages, and we have to make sure bad apples don't slip in."

The UFPA, a trade association for the produce supply chain, has raised concerns about the awards, saying in a letter to the USDA that some of the companies have no record of similar work, don't have truckers or delivery systems, do not operate in the region where they are supposed to provide services, or were awarded contracts larger than their annual revenue.

"We know of several upstanding companies that are current government contractors to USDA and the DOD Fresh program who were seemingly denied on mistaken grounds," Stenzel wrote in the letter to the USDA. He has asked the USDA to clarify the process for companies that did not get contracts to dispute the rationale provided by the USDA.

The contracts were awarded under the Farmers to Families Food Box Program, launched last week with a visit by Ivanka Trump to a Laurel, Maryland wholesale produce company. About $1.2 billion in contracts have been awarded so far.

The relief program was designed to buy up $3 billion in agricultural surplus from farmers and ranchers who have been forced to dump produce and milk and euthanize animals because of supply chain disruptions, and redistribute it to food banks that have been overwhelmed by demand from newly hungry Americans.

Across the country, an unprecedented disconnect has emerged between where food is produced and the food banks and low-income neighborhoods that desperately need it. Widespread food service closures and shutdowns in meat-processing facilities have caused dairies to dump thousands of gallons of milk a day and farmers to euthanize their baby pigs or chickens because there's nowhere to slaughter them. Produce farmers in Florida and California have been forced to plow under ripe vegetables because their supply chains have dried up. And skyrocketing unemployment has meant millions of Americans have become food insecure for the first time.

The USDA provided their criteria for awards in an emailed response to questions.

"Proposals for the Farmers to Families Food Box Program were evaluated by, in descending order of importance, the technical information contained, the prices offered, past performance of the offerer and the offeror's capability to perform."

Food industry experts say that the USDA may have moved too fast to vet the contractors properly, awarding 198 contracts in a week.

"The staff worked around-the-clock to review nearly 600 bids," Jim Mulhern, chief executive of the National Milk Producers Federation, said in a phone interview. "There is no question there would be some potential mistakes. What we hope is that most of the money awarded in these bids goes to the actual purchase of product, rather than overhead, because that's where the need is."

U.S. Secretary of Agriculture Sonny Perdue has noted the unusual speed of the awards process, saying in a statement, "This is a new, innovative approach to provide critical support to American farmers and families, and USDA moved as expeditiously as federal procurement rules allow to stand up the program and solicit offers."

The food box program has been fast-tracked in a way seldom seen in federal programs. Requests for proposal were due on May 1. On May 8, the USDA approved $1.2 billion in contracts for the program, and on May 15 the first boxes began to make their way to food banks around the country.

Sherrie Tussler, executive director of the Hunger Task Force, a 47-year-old anti-hunger organization in Milwaukee and the state's largest food bank, submitted an application for a $37 million contract and was denied.

"Dairy farmers in Wisconsin have been spilling milk for about six weeks," she says. "We hooked up with Wisconsin's department of agriculture, and we started buying their cheese and milk. So, we apply thinking, 'we know how to do this.' And we don't get a dime but a wedding planner in Texas gets a huge grant? Some of the awards look pretty suspicious."

She says despite huge surplus dairy dumping, Wisconsin-based companies only got $9 million in awards.

Other key agricultural states such as Nebraska, North and South Dakota, and Kentucky that have been badly hit by slumping demand for meat, produce and dairy were also overlooked, according to an analysis by the Midwest Center of Investigative Reporting.

"We are frustrated reading the list of awarded groups outside Wisconsin," Tussler said. "Many appear to be large aggregators, and in some cases, have no understandable connection to agriculture."

Aggregators are central warehouses that serve institutions or restaurants. They "aggregate" different foods and fulfill orders, delivering chicken nuggets, milk and potatoes all on the same truck. She worries these will not directly benefit farmers in crisis.

Some longtime hunger relief advocates think that many of the awards overlook existing infrastructure that smoothly connects surplus food with those in need.

"We have local organizations already doing the work. This feels like reinventing the wheel. I'm concerned when I look at the awards, not knowing how it will unfold," said Natalie Czarkowski, field organizer of the Hunger Relief Federation of Wisconsin, a group of more than 20 anti-hunger organizations in Southeastern Wisconsin.

"A lot of food needs to go a lot of places quickly and I'm not confident. The local organizations were left out of this program. They are now just donating their cheese and dairy because they can't find anyone to buy it. With this, they could have been getting it bought," she said.

Other food box contracts have gone to companies with a long track record, such as Borden Dairy ($147 million), which has recently filed for bankruptcy. Two of the four largest meat processors, Cargill Meat Solutions ($7.3 million) and Tyson Foods ($862,000) were also contract recipients. Both have experienced meat-processing plant closures due to covid-19 outbreaks as well as allegations of potential price fixing during the pandemic, which Tyson and Cargill deny.

Nonetheless, Dale Moore, executive vice president of the Farm Bureau is confident that "if there's any suspicion of impropriety, they will raise an alarm. The farmers aren't a bashful bunch. I can tell you the USDA, through its different agencies and the procurement arm for the nutrition programs, there are a number of ways of enforcement and audit trails."

Sysco, U.S. Foods and Performance Food Group, which together account for more than a third of all food service business, received no contracts.

"The USDA has not provided us with insights around their initial decisions, however we remain open to participating in the program as the USDA finalizes their needs for the remainder of the year," said Sara Matheu, director of media relations for U.S. Foods.

Stenzel says it is possible that these broadline distributors got underbid.

"Maybe legit companies priced what they thought was fair and other companies lowballed," he said. The selected contractors are responsible for sourcing food from producers, all aspects of preparing the boxes, finding and communicating with nonprofits and final delivery of boxes to the nonprofit on a mutually agreeable, recurring schedule.

"Successful proposals included many small businesses and those that will support local and regional farmers, which was part of the evaluation criteria for contract award," the USDA wrote in a statement about the approved proposals.

Hunger advocates say the broad outlines of the Trump administration's program make sense.

"From the beginning, the USDA wanted to involve distributors in some way because they wanted to take the burden off the food bank to pack those boxes," says Carrie Calvert, vice president of government relations, agriculture and nutrition at Feeding America, a group of more than 200 food banks around the country.

"There are already relationships between the food banks and some of the contract winners, with others there will be a learning process," she said.

The first round of contracts runs from May 15 to June 30, and include $461 million in fresh fruits and vegetables, $317 million in dairy, $258 million in meat and $175 million in a combination box of fresh produce, dairy or meat products.