Losing Their Lunch: School Food Plan Hits New Snag

Categories: The Money Trail
The food system that serves New York City's 1.1 million schoolchildren took another blow Friday—only the latest in the 18 months since the Department of Education launched a new plan to have just three delivery companies distribute food to schools in all five boroughs. The company that handled deliveries in South Brooklyn and Staten Island, Watemelons Plus, is getting out of its contract. In fact, according to the DOE press office, it is getting out of business altogether.

And this matters why? Well, the New York City school system is the second biggest feeder in the United States (the military ranks No. 1), the DOE has made a genuine effort recently to improve food services to fend off childhood obesity, and the school food system has been a trouble-spot for years, with several vendors going to federal prison earlier this decade for colluding to rip taxpayers off. Then there's the money: millions of dollars in food sales and delivery costs, not to mention the $12 million for the Accenture consultancy to—among other potential cost-saving ideas—map out the food delivery plan that keeps not quite working.

Watermelons Plus—which did not return a call seeking comment—isn't the first of the delivery companies to run up the white flag. Louis Foods, which originally handled Queens and North Brooklyn, pulled out of its contract this summer, saying it was losing too much money. Now Driscoll Foods is the only original vendor left, and its territory was sliced in half last year when major delivery woes forced the DOE to declare an emergency and bring in extra contractors. Driscoll remains active in the Bronx, while U.S. Food took up Driscoll's work in Manhattan.

U.S. Food will also be taking up the slack from Watermelons Plus—a step for which the DOE says it had time to plan. "This wasn't entirely unexpected for us," says DOE spokeswoman Kelly Devers. "We knew (Watermelons) would be getting out of the contract. (U.S. Food is) our biggest and strongest vendor so we're confident that the transition will go smoothly," referring to the resumption of school on Tuesday after holiday break. The DOE anticipates no shortages, she says; at worst, there'll be a handful of substitutions on some menus for a few weeks.

But for the DOE's future plans, things might not go quite so smoothly. "Everybody's going to be totally paranoid of this contract," said one area food distributor. Watermelons' departure comes as the DOE is trying to rebid the parts of the original plan that went into emergency contracts; that was supposed to occur in November but now won't happen until February. Meanwhile, efforts to improve the DOE computer system for tracking goods and payments are "ongoing," according to Devers.

One can't say for sure why Watermelons folded, but it's reasonable to presume that the DOE contract wasn't a huge financial plus. Last year, as deliveries arrived late at the schools, the DOE fined delivery firms tens of thousands; Watermelons Plus led the way with nearly $150,000 in fines in just the first seven months of the 2004 school year. Vendors have called those fines unfair, blaming flaws in the overall plan for the delays. The comptroller's office has conducted some preliminary inquiries on those complaints, although it won't call it an "investigation."

We don't know what Watermelons has been fined since last April, or what penalty it might face for exiting the contract early. As Power Plays reported last month, Louis and the DOE might have to go to court to sort out a dispute over alleged overpayments.

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