Food Assistance:

School Milk Contract Bid-Rigging

RCED-93-5: Published: Oct 16, 1992. Publicly Released: Nov 18, 1992.

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Pursuant to a congressional request, GAO examined bid-rigging on school milk contracts, focusing on: (1) problems with agricultural laws or administration which allowed bid-rigging to occur; and (2) the possible influence of the Capper-Volstead Act on bid-rigging.

GAO found that: (1) milk contract bid rigging can be attributed to illegal business practices, but not legal deficiencies; (2) the Justice Department considers antitrust and bid-rigging legislation adequate; (3) federal price setting may facilitate collusion and bid-rigging; (4) limited exemptions under the Capper-Volstead Act create difficulties in prosecuting bid-rigging among dairy cooperatives; (5) federal dairy policy objectives include price and income supports, consumption expansion, quality control of the milk supply, and dairy price and market stabilization; (6) two programs which carry out federal dairy policy are the Milk Marketing Order Program and the price support program; (7) the Justice Department and the Department of Agriculture (USDA) have responsibility for oversight of agricultural cooperatives; (8) both Justice and USDA lack a formal process for sharing information and must rely on ad hoc methods for sharing bid-rigging information; (9) parties guilty of bid-rigging or collusion may be suspended or excluded from participating in federal contracts or federally funded programs; (10) USDA has failed to suspended any of the violators convicted of bid-rigging offenses; (11) bid-rigging awareness training for contracting officials can effectively identify and deter collusion and bid-rigging on a nationwide scale; and (12) USDA has provided bid-rigging awareness training for school procurement authorities and would like to expand training to other jurisdictions.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA's Food and Nutrition Service and USDA's Capper-Volstead Act Committee are pursuing developing a more systematic process for sharing bid-rigging information with the Department of Justice.

    Recommendation: To enhance federal capabilities to identify and deter improper bid-rigging between dairy cooperatives, the Secretary of Agriculture and the Attorney General should develop a systematic process for coordinating and sharing information on dairy cooperatives suspected of illegal bidding on contracts.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: The Department of Justice is taking action to share information with USDA to deter bid-rigging activity. Specifically, DOJ will send monthly reports to USDA summarizing DOJ investigations and prosecutions involving the dairy industry.

    Recommendation: To enhance federal capabilities to identify and deter improper bid-rigging between dairy cooperatives, the Secretary of Agriculture and the Attorney General should develop a systematic process for coordinating and sharing information on dairy cooperatives suspected of illegal bidding on contracts.

    Agency Affected: Department of Justice

  3. Status: Closed - Implemented

    Comments: On July 21, 1993, USDA announced its first department action against a dairy that had been convicted of bid-rigging. USDA is currently reviewing several other cases for debarment.

    Recommendation: With regard to individuals and companies convicted of or indicted for bid-rigging, the Secretary of Agriculture, as appropriate, should suspend or debar such individuals or companies from participating in school milk contracts or take other appropriate administrative action.

    Agency Affected: Department of Justice

 

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