Education Lab

Did Fresno Unified overpay for fruits and vegetables by hundreds of thousands of dollars?

Fresno Unified may have overpaid for produce by hundreds of thousands to millions of dollars according to one of the district’s longtime suppliers, David Miller of Fresno Produce.

Invoices obtained by Miller show the district paid a few cents more than the bid price for a number of individual fruits and vegetables, like yellow peaches and nectarines. But those pennies per item over the years add up to a lot of money at a district the size of Fresno Unified, Miller said.

“Why even have a bid if you’re not expected to stick to it?” Miller said. “We’re only getting documents related to three elementary schools. Who knows where it goes from there.”

For Olmos Elementary in October 2015, for example, Miller found the district paid $1,304 more than initially agreed upon in its bid.

Miller requested thousands of pages of invoices from the district to compare the bid price to the billed price for fruit that’s served as part of the Fresh Fruits and Vegetables program, a U.S. Department of Agriculture grant-funded program. He said he was alerted to a possible discrepancy after receiving the first few invoices via anonymous letter.

Miller said he felt compelled to dig through the documents after losing a portion of his contract to a rival supplier who initially offered a lower price on broccoli and romaine lettuce, and then billed a higher price. The district awards contracts to the lowest overall bidder.

“I don’t mind losing; I just want to lose fair and square,” Miller said.

Fresno Unified’s response

Fresno Unified says the nature of the Fresh Fruits and Vegetables Program allows the district to stay flexible, paying for variable quantities or sizes as needed, and adjusting to weather events that may have affected the year’s crop.

The district also has an interest in maximizing the grant it receives, which is the largest in California at approximately $2 million, according to Chief Operations Officer Karin Temple.

If the district doesn’t spend the grant in its entirety one year, it may not receive as much the next year, Executive Director of Purchasing Paul Rosencrans said.

The district is in the process of reviewing the invoices Miller requested, according to Rosencrans.

“I don’t know that we’ve found a particular product that there wasn’t a justification for the price increase,” Rosencrans said. “If there is something to find, I want our money back, too.”

The review has proven to be a slow process, Rosencrans said, as the district received only print invoices for produce and didn’t have a spreadsheet of billed prices compared to bid prices until Miller made one and presented it to the Board of Trustees.

“One thing we’ll require of our upcoming bid is that vendors provide electronic billing,” Rosencrans said. “So I can make a spreadsheet and sort it by type of fruit or vegetable and compare prices.”

Rosencrans also said that the district is looking to split up its bid between suppliers, with one contract going to the lowest bidder, and another contract going to the second-lowest bidder. Doing so would help ensure that billed prices are fair, according to Rosencrans, because any seasonal fluctuations would have to be reflected by both vendors.

“I’m a purchasing guy, so I’d love to have an index,” Rosencrans said. “But there is no independent body to tell me how much to pay for these apples.”

‘It’s all weather’

The contracts that Miller took issue with went to rival supplier 1st Quality Produce. Chief Executive Officer Mike Kahaian says there are a number of reasons that a billed price may end up being more than the bid price.

“It may be something as simple as swapping a red delicious apple, which is kind of a bland apple, for a better-tasting blush apple like a Gala,” Kahaian said. “And it’s all weather: A hurricane in Florida may affect crop prices in California six months later.”

Fresno Unified always got what they paid for when ordering from 1st Quality Produce, according to Kahaian. He said he does not remember the specific contract for broccoli and romaine lettuce that Miller cited as his impetus for requesting the invoices.

But his guess is that 1st Quality may have contested the measurements that Fresno Unified used when putting out the bid, asking to re-quantify the product in ounces rather than 1/4-cup sizes, which could have led to a rebid of the contract.

Jicama with lime and chili

Fresno Unified orders thousands of pieces of produce every month for 57 elementary schools that participate in the Fresh Fruits and Vegetables Program. The snacks are offered on a wagon at recess at no cost to students.

It’s a way to introduce kids to more unusual fruits and vegetables than are legally required on their plates at lunchtime: jicama sticks with lime and chili powder and in-season stone fruit slices are some district favorites, said Jose Alvarado, director of Fresno Unified’s Nutrition Center.

The program works well at Fresno Unified due to the variety of produce grown locally, according to Alvarado.

“We want our suppliers and farmers to be successful, because that benefits the whole region,” Alvarado said.

But Alvarado also said that managing the optional program on top of the 15 million meals that the Nutrition Center must process every year has been challenging. Fruit and vegetable snacks must be served three times per week and offered to all students at a school, and the California Department of Education requires districts to document all fruit and vegetable costs related to the program.

The district also tries to be fair to suppliers, Alvarado said, who have to deal with unpredictable weather and water events. The Fresh Fruits and Vegetables bid includes a clause saying, “at no time shall the prices charged the District exceed the prices bid,” but that “bid price increases will require approval from the Director of Nutrition Services.”

“If it’s a justifiable price increase, we work to honor it,” Alvarado said. “Because if all your lettuce is frozen, what can you do?”

Miller said he does not agree with the district’s explanations of the price discrepancies. He said he believes the district would benefit from an independent audit of its books. He says that in 28 years of supplying produce to the district, he only raised prices on Fresno Unified once.

He said he also understands the pressure on the purchasing department to spend every penny it receives in grant funding or lose it later.

“But be smart about it. Buy raspberries or blueberries, which are expensive,” Miller said. “Get the bang for your buck.”