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Defense Department Food Selling Rules Snag Local Seafood Company

The United State Department of Defense buys a great deal of different things to equip and support its soldiers, sailors and airmen. This includes not only their equipment and weapons, but also their health care, housing and support. Part of that is the network of stores runs by the Armed Forces Exchange Service (AFES) and the Navy Exchange Service (NES). These operate on military installations and overseas to provide goods to military personnel, dependents and retirees. Exchanges are large department stores and Commissaries are the supermarkets.

The commissaries pride themselves on offering the same goods and brands as supermarkets on the civilian market. To aid this Congress has passed special rules and regulations relating to their purchasing items for sale on their shelves. These include a waiver of the rule to have multiple bids for a product. By limiting competition this way the national brands are available to the shopper; not just those of the lowest bidder.

Unfortunately Alder Foods, Inc. of New England has fallen a foul of those rules and may lose its privileges of selling its seafood products in commissaries.

In order to be considered “name brand” and be sold the products must also be sold on the commercial market. Alder sells its Rainbow Seafood only to the government. It does not exist on the civilian market. This saves the company money as they don’t have to market it or deal with the costs of selling in a chain supermarket such as Stop and Shop but because of its unavailability in this market it may not be on the commissary shelves itself.

Alder ran into trouble when another seafood company was denied access to the commissaries for the same reason. That company pointed out to the government that Alder was violating the rule as well. Now Alder must begin to sell on the commercial market or face the loss of their only customer.

Legislators in Massachusetts are trying to intervene to change the rules to allow Alder to stay in the business. Of course, doing so may open it up to competition from other companies that may in the end reduce its market share.

Alder is not alone as the makers of over four hundred products are facing the same situation. The government found that they had not been enforcing the rule on existing contracts, only on new ones. Now it must be enforced in all cases and that will cost some businesses money and force them into markets where they haven’t ever competed.

Federal procurement is complicated and government by myriad regulations and laws. Sometimes these work to help companies and and in this example they may work against them. Ideally the government should be buying everything competitively with the goal of getting the best product for the best price.

It doesn’t always work out that way.

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