Infant Formula Rebate Contracts Provisions Restricting Competition

In the course of reviewing Invitations for Bids (IFB) for infant formula rebate contracts, the Food and Consumer Service has noticed that certain provisions may preclude some infant formula manufacturers from bidding. One example is provisions requiring multiple manufacturing facilities which are intended to insure continued delivery of formula in the event of plant shut-downs, natural disasters or other unpredictable occurrences. Although such provisions are intended to achieve legitimate state agency purposes , they are often too broad and may result in restricting competition by precluding bidding by otherwise qualified manufacturers.

Such provisions violate the spirit of Section 246.16(Q) (2) of the WIC program regulations, therefore restricting competition. The regulations state that "State agencies shall not issue invitations for bids or enter into contracts which  exclude from consideration in the bidding evaluation any infant formula manufacturer in compliance with the Federal Food, Drug and Cosmetic Act (FFDCA). 11. Therefore, the Department will not approve future IFBs or contracts that include provisions that erroneously restrict competition for WIC infant formula rebates.

If the goal is to prevent interruptions in supply, this can be accomplished by an "insufficient quantities provision, " requiring a contractor who is unable to supply the contracted quantity of formula to pay a rebate for non-contracted for mu l a (and any resulting increased costs to the state agency) until the contracted formula can be supplied again. In lieu of a requirement that a contractor have multiple manufacturing plants, such a provision would adequately protect the state agency's interest without precluding bidding by an otherwise qualified manufacturer.

Please inform your respective state agencies of this policy. If you have any questions, please contact us.

STANLEY C. GARNETT
Director
Supplemental Food Programs Division