Buy Right with the NEW Regulations

Definition A bid is a contractual procurement agreement between a school foodservice and a vendor for:  Specified Time  Specified Price  Specified Quantity

Purchasing decisions must be based on the nutritional needs of children. Purchasing supports the primary goal of the Child Nutrition Programs, which is “to protect the health and well being of the nation's children,” As stated in the National School Lunch Act of 1946

Why is Purchasing Important? Ensure quality meals that meet student preference for best possible price Food and supply costs under control of school managers/directors Shrinking resources

Why Bid? Preferred product Legal Issues Lowest Price Keep Distributors Honest District Requirements

Procurement Regulations NSLP – Title 7 of Code of Federal Regulations (CFR) Part Federal Procurement 7 CFR –Part 3016 –Part 3019 fns.dpi.wi.gov/fns_procurement

Methods of Procurement 3 Most Common Types of Purchasing –Bid –Invitation for Bid (IFB) –Request for Proposal (RFP)

Bid Selection (Contract Award) of Product or Service is Based On –Price Only

Invitation for Bid Selection (Contract Award) of Product or Service is Based On –Price Only –Minimum Specification

Request for Proposal Selection (Contract Award) of Product or Service is Based On –Price Only –Minimum Specification –Weighted Criteria

Weighted Criteria Assigned Points Reflect Significance of Item or Goal Price Must be the Most Significant

Weighted Criteria Point spread between the best proposal and the second best should be mostly based on the importance of the item or goal Matrix used to sum up points and award contract

Informal Method of Procurement Definition: Total Value of the Contract for Goods and Services is under $ 100,000 Solicitation of Companies (minimum 3) Known to be Doing the Kind of Business Needed

Formal Method of Procurement Definition Must be Written Total Value of the Contract for Goods and Services is over $ 100,000 Mailed to all Companies (minimum 3) Know to be Doing the Kind of Business Needed Intent to Purchase Must be Published a Minimum of 14 Days Prior to the Due Date in the Legal Notice Section of a General Circulation Newspaper Opened Publicly

Bid Protocol at Opening Offers are taken under advisement 2 – 3 people present Only bidders may view other bids before public record Public record after awarded and purchased Absolutely NO feedback until evaluation is completed –then it goes to the bid department

Getting Started Identify: Goods and/or Services Quantities Needs and/or Requirements Separate “Got to Have” from “Nice to Have”

Procurement Good Administration Ethics in Purchasing Free and Open Competition Clear and Accurate Description Procedures

Good Administration Award bids or proposals to only responsible contractors Ensure that pre-qualified lists of person, firms or products are current Adequate number of qualified sources

Good Administration Do you have written selection procedures for procurement transactions that ensure that all bids or solicitations: 1.Use “brand name or equal” or multiple brand names without “equal” when it is impractical to clearly describe technical requirements of the product? 2.Identify all requirements which the bidders must meet and all other factors that will be used in evaluation bids or proposals?

Ethics in Purchasing Questions related to ethics do not always have clear answers. A good general rule is: “If you question an action, then you should not proceed.”

Purchasing professionals agree that unethical behavior is: Providing one supplier’s cost information to another supplier before supplier selection. Showing preference to suppliers because of pressure from administration or boards. Accepting gifts or cash from a supplier.

Additional ethical issues: Allowing personality to enter into purchasing decisions Obtaining proprietary information from one supplier and sharing it with their competitor Accepting free trips and entertainment.

Promotion of Free and Open Competition Determine Companies Doing The Type Of Business Desired Contact All Known Companies

Situations Considered to be Restrictive of Competition, but are not limited to: Situations Considered to be Restrictive of Competition, but are not limited to: Placing unreasonable requirements on firms to qualify to do business Requiring unnecessary experience and excessive bonding

Situations Considered to be Restrictive of Competition, but are not limited to: Non-competitive awards to consultants hired on retainer basis Organizational conflicts of interest Specifying only a “brand name” product instead of allowing “an equal” product to be offered and including the specifications Any arbitrary action in the procurement process

Promotion of Free and Open Competition Geographic preference, or “local preference” NOT permitted See 7 CFR Part (c)(2) Use domestic products to the maximum extent possible Follow the most restrictive of local, state or Federal law, rules

Clear and Accurate Descriptions Product Specifications Problems with specifications Developing descriptions

Reasons to have Specifications Clarifies what the food production unit wants Informs the distributor and manufacturer what the customer wants Advises the receiving person what should be delivered

Product Specification Product name Federal grade Size information: container and product Bid unit Quality indicators Packaging requirements Test or inspection procedures One source of specs

Product Specification Evaluate product quality before bid opening – brand pre-approval % price difference = quality difference Direct relationship between the length of time of prices held and the price paid

Problems with Specifications Brand prejudice – no “or equal” Unreasonable requirements not related to quality but increase price: i.e. delivery Competition limited due to too tight specs Quality level specified difficult to obtain

Problems with Specifications Cont’d Not updating specs Purchasing and receiving staff not trained to use specs Vendor, after gets bid: “low balls” or trades up to more profitable item Inequality among bidders if specs too loose If error: stuck for the bid period

Developing Descriptions One Ingredient or One Major Ingredient: Rely on Standards of Identity and Grade standards; state this in bid and don’t repeat info. Determine grade needed and state “to be packed to USDA grade __ standards

Developing Descriptions Multiple Ingredient (Highly processed): A system for consistent results might include Regulations: research re: manufacturer of product Industry Standards: check with professional organizations, and product and bid specialists Quality Indicators: study and evaluate those not covered by regulations

Developing Descriptions 1.Student Taste Test: to narrow down broad categories 2.Write Draft Description 3.Use draft to create product comparison work sheet with products currently available: Extra requirements not currently available increase cost 4.Modify Description as needed

Developing Descriptions 5.Review by manufacturers’ technical and bid specialists 6.Revise as needed 7.Student taste test for approved brand acceptance

Procedures Records to Keep Documents issued to solicit price proposals Responses from vendors Signed award documents Reason for vendor selection

Must maintain written selection procedures that: Give clear, accurate requirements for the product but do not unduly restrict competition Identify all requirements contractor must fulfill or meet Identify other issues used to evaluate bids proposals

Documentation Schools and Districts must keep all records regarding selection of a bid to proposal to show: Rationale for method of procurement Selection of contract type Vendor selection or rejection Basis for contract price

Time Line Considerations (working backward from delivery) Bid award to first delivery: Allow 2 -3 wks between vendor notification and 1st delivery; inform receivers Bid opening: take all bids “under advisement”, usually require board approval, Bid issue to opening: at least 3 wks; consider off season; consider copies of significant pages to brokers and mfrs

Time Line Considerations (working backward from delivery) Final Conference to Prices: Depends on accuracy of earlier steps done; ~ 2 weeks Screening to Final Draft: Depends on number of changes to the product list and brand approvals Screening: 1 st time could take a year for verifying, updating info; 3 mos. In later years

Rule Changes for Contracting with FSMC –Allowable costs must be net of discounts, rebates, credits. –Only allowable costs can be charged to nonprofit food service account.

Rule Changes for Contracting with FSMC DPI to review contract terms of invitations for bids and/or requests for proposals before their issuance.

Rule Changes for Contracting with FSMC The SFA is also required to obtain: DPI’s approval of any changes or amendments before any contract or amendment to an existing FSMC contract is executed.

Rule Changes for Contracting with FSMC Two Prototype FSMC Contracts: Fixed Cost Cost plus a Fixed Fee