Before the pandemic, a company named CRE8AD8 marketed events in San Antonio, Texas. After COVID-19 swept the globe, it tried its hand at supplying food to needy families through a USDA program called Farm to Families Food Box.
It didn’t go well.
The company told the San Antonio Food Bank it would provide 57 truckloads, with about 1,600 food boxes per truck, said Eric Cooper, the food bank’s president and CEO. But it only received about 22 and a half truckloads, he said, at a time when it’s serving about double the number of families it used to pre-pandemic.
"I do think there's been some challenges in choosing quality contractors,” Cooper said of the program. “I think that most of them have experience and are very reputable, but I know for the one that we have here in San Antonio, they had no experience, and therefore they were given a large contract and they were not able to deliver on that contract."
Gregorio Palomino, the company’s CEO, disputed that characterization.
"We are experienced, capable and have proven we were the right company for this contract," he said.
The USDA created the Food Box program to help feed families struggling during the pandemic. A review by the Midwest Center shows that some program contractors were expected to work in a new field or with new products they weren’t used to handling.
For example, Travel+Well Holdings, a Santa Rosa, California, health and wellness company, received an extension to their initial $12 million contract to distribute fresh fruits and vegetables in western states. Travel+Well did not respond to requests for comment.
The USDA did not respond to requests for comment.
Almost all of the nearly 200 contractors received extensions to their contracts, according to an announcement from the USDA. But ten companies, including CRE8AD8, Cargill Meat Solutions and Yegg Inc., did not have their contracts with USDA renewed because, according to the agency, they failed to comply with the program’s requirements or the company requested the contract not be renewed.
In early June, US Secretary of Agriculture Sonny Perdue announced he expected “up to 40 million” food boxes to be delivered by the end of the month.
The department is just now about to hit that mark halfway through July. As of Wednesday, 39.7 million boxes have been invoiced, according to the department’s tracker on its website.
About 4 million boxes were invoiced during the first two weeks of July, according to the department’s online records.
The first company that had its contract terminated was California Avocados Direct. Although it usually only sold avocados, it received a $40 million contract to distribute 25 different fruits and vegetables, including tangerines, oranges, potatoes and onions, according to Fox 5 San Diego.
Yegg Inc., a California firm that offers business finance solutions, was awarded two contracts to distribute $16.6 million of fluid milk and dairy products, according to Politico.
Recently, Yegg changed its website to include a description more in accordance with the USDA’s contracts. In September, the firm described itself as "expert providers of business finance solutions.” By May, their website read "food and dairy distributor and expert brokers of trade finance solutions."
The USDA did not extend Yegg Inc.’s contracts, and the company did not respond to a request for comment.
The USDA increased the program’s budget by about 22 percent recently, and in total, it extended and provided new contracts that are worth about $1.47 billion of food in family-sized boxes, according to the agency.
CRE8AD8 (pronounced “create-a-date”) did not have the proper license to sell perishable food until a week after it was awarded its contract. According to ProPublica, 49 contractors were not properly licensed when they received their Food Box contracts.
Palomino said the company had experience in food and beverage procurement, distribution and management.
The company received some of the largest contracts in the Southwest — $39 million in total — to distribute fresh fruits and vegetables, dairy products and pre-cooked meat. It created a project called CRE8AMEAL and began hiring personnel to help distribute 750,000 food boxes to families around the region.
By the end of June, CRE8AD8 delivered about 147,000 boxes to 23 food banks and an estimate of 35,100 boxes to churches and other faith-based groups, less than a quarter of the expected amount, according to San Antonio Express News.
In a letter to the USDA, Congressman Lloyd Doggett from Texas, whose district includes parts of San Antonio's metropolitan area, urged the agency to cancel CRE8AD8’s contract. He also called the contract process "wrongheaded.”
The contract was "awarded under the highest stakes to some firms almost sure to fail to meet hungry families' needs in time," Doggett said.
Cooper, the food bank’s president, also said that the food bank had to absorb the expenses of handling the produce and delivering it to families.
"The contractors right now are not willing to help with those expenses," he said.
He said the USDA did not establish any mechanism to help the food banks cover those expenses, either with help from contractors or the department itself.
"They just say to negotiate that with the contractors, but the contractors basically say, ‘Well you want the food or not?' and if we want the food, we should just take it," Cooper said. "The food banks are handling the majority of the volume and we are stuck because we need the food, we want the food, and if we ought to get someone else to pay for the expenses we're willing to do that, but I would think the USDA would have a more transparent model to help the contractors that were technically being paid to do that last mile work, but they've just chosen to keep the revenue."
Cooper said that the USDA told him that the contractors "were supposed to deliver the food to the distribution sites. But many of the contractors say they don't have the right equipment or they don't have the ability to do that."