1. Procurement 101 Washington State Nutrition Association Conference July 30, 2012 Donna Parsons MS, RD Director, Child Nutrition Services Jennifer Mitchell MS, RD Fresh Fruit & Vegetable Program Specialist

2. Procurement 101 Objectives Recognizing the need for financial management. Being good stewards - understanding the pass down requirements. Procurement Basics: Understanding free and open competition Definitions – laying the groundwork for the future The bottom line

3. Financial Management What is it…and why waste time thinking about it?

4. What is Financial Management? It is the management of organizational finances to achieve its financial objectives. Key elements include: – Financial Planning: Managing ones needs. – Financial Control: What is being done to ensure funds are being used properly? – Financial Decisions: Determining how funds are spent.

5. Financial Management Importance Managing the financial resources of federal school meal programs is critical to the success of maintaining quality standards and ensuring nutritious meals are served to children. Dollars spent by the federal government, states, and paying students added together represent a significant level of public funding.

6. …we are stewards of taxpayers money The federal government has a fundamental responsibility to be effective stewards of the taxpayers' money. We must be responsible with money that comes in to the government, money that is spent, and money that is used in running the government itself. Decision makers and the public must have confidence in financial management in order to make informed decisions about managing government programs and implementing policy. http://www.whitehouse.gov/omb/financial_default/

7. Congress Laws establishing School Nutrition Programs Laws establishing financial requirements USDA Develop and apply 7 CFR Parts 3016 & 3019 Develop and apply program regulations 7 CFR Parts 210, 215, and 220 Develop and apply guidance and instructions OMB Issue OMB Circulars OMB A-133Circulars A-102, A-110, A-87, A-122, and A-133 State Agencies Comply with 7 CFR Parts 3016 and 3019 Comply with USDA program regulations 7 CFR Parts 210, 215, and 220 Comply with USDA guidelines and instructions Comply with state law, regulations, and policies that are not in conflict with federal requirements

8. School Food Authorities (aka LEAs) Comply with 7 CFR Parts 3016 and 3019 Comply with USDA program regulations 7 CFR Parts 210, 215, and 220 Comply with USDA guidelines and instructions Comply with state law, regulations, and policies that are not in conflict with federal requirements Comply with local law, regulations, and policies that are not in conflict with federal requirements

9. Poor financial management…

10. Who? All entities using federal funds must follow the federal procurement process. Proper procedures, no matter how small the cost, must be followed by anyone using federal funds.

11. What? Procurement is the purchasing of goods and services. It is a process, not an event, which involves: – Distinct phases of planning; – Drafting specifications; – Advertising the procurement; – Awarding the contract, and; – Managing the contract.

12. Why? Going through the procurement process is to ensure that the LEA receives goods and services: from the most responsible vendor; from the most responsive bid; at the lowest possible price.

13. A Good Procurement A good procurement consists of four principles: – Free and open competition; – Fairness and integrity; – Responsive and responsible contractors, and; – Transparency.

14. The Importance of Competition Accountability to taxpayers; More and/or higher-quality goods and services; Protection of businesses and the health of the economy, and; The cost of good and services may be the only area the LEA can directly influence its costs.

15. Program Regulations for Procurement: – NSLP: 7 CFR 210.21 – SBP: 7 CFR 220.16 – SFSP: 7 CFR 225.17 – CACFP: 7 CFR 226.22 Uniform Administrative Requirements for Procurement: – State/local governments: 7 CFR 3016.36 – Non-profits: 7 CFR 3019.44 Where?

16. 7 CFR Part 210 LEAs must: Establish and operate a nonprofit school food service account. Ensure all revenue from all food service operations conducted by the LEA is retained and used only for the operation or improvement of the nonprofit school nutrition program.

17. 7 CFR 3016.36(b)(3) LEAs must have a written code of procurement standards or conduct: – Guidelines/limitations for employee actions. – Be clear about need to avoid real and perceived conflicts of interest. – Foster competition in all actions. – Require rationale and documentation for methods used. – Establish written selection procedures for all methods used.

18. Buy American Provision National School Lunch Act requires the purchase of domestic agricultural commodities and domestic food products. LEAs must ensure end products received from processors contain only domestic goods (i.e. flour used to make chicken nuggets). LEAs should include a Buy American clause in all product specifications, solicitations, purchase orders, and any other procurement documents so that contractors are aware of this requirement.

19. Geographic Preference The 2008 Farm Bill amended the National School Lunch Act to include geo preferences. Applying a geo preference is prohibited in federal procurement except where applicable federal laws expressly permit their use. Geo preferences are not required, it is an option that must be stated in the solicitation.

20. When? Anytime the LEA decides to purchase, it must go through the procurement process. – There is no bottom threshold amount.

21. Procurement Planning Steps Forecasting Menu Enrollment Revenue Expenses Market Analysis Level of competition Economy of scale Determine Procurement Method Formal Informal

22. Procurement Methods Similarities – Use of a solicitation – Competitive – Not based on basis of cost plus percentage of cost or cost plus percentage of interest Differences – Informal method typically yields fewer bids – Formal method is more rigorous and prescriptive

23. Procurement Methods Key elements to determine formal or informal: – The estimated value of the contract. Requires knowledge of the most restrictive small purchase threshold. The value includes purchased and donated USDA Foods. The small purchase threshold applies to an event, not to cumulative purchases over the year. – The length of time the vendor will guarantee price(s).

24. Splitting the Procurement LEAs may not intentionally split purchases to fall below the small purchase threshold and to avoid the formal procurement method.

25. Informal Procurement Does not exceed the small purchase threshold: USDA = <$100,000 Washington State = <$75,000 Requires a solicitation for quotes Should be written prior to request for quotes A minimum of 3 quotes Requires detailed documentation

26. Informal Procurements Four Solicitation Phases Write down the specifications Identify >2 responsive quote sources Obtain written confirmation of quotes Make award determination

28. Formal Procurement Can be used with any procurement but is required with purchases of: USDA = >$100,000 Washington State = >$75,000 Requires a solicitation for bids Requires detailed documentation Two types of formal procurements Competitive sealed bids Competitive non-sealed bids

29. Competitive Sealed Bids LEAs advertise an Invitation to Bid (IFB) Results only in a fixed price contract – Firm fixed price – Fixed price with economic priced adjustment – Fixed price with prospective price redetermination Requires no negotiation Awarded solely on basis of price

30. Competitive Sealed Bid Examples Firm fixed price for canned vegetables: – Specs are easy to develop – Forecast amounts based on past performance – Award to the lowest responsive bidder Fixed price w/prospective price redetermination for milk products: – Same as firm fixed price – Advance price for skim milk & butterfat is used monthly to adjust price up or down based on federal milk market order.

31. Competitive Non-Sealed Bids LEAs advertise an Request for Proposals (RFP) Results in a fixed price contract. Used when price is one of several factors in determining the award. – RFPs are not sealed as the LEA and vendors may need to negotiate contract factors. – Award is based ultimately on price.

32. Some final things to consider…. USDA Foods Procuring a processor? Be clear about distribution agreements Address whether bonus USDA Foods may require processing Address possible substitutions whether involving commercial or USDA Foods

33. USDA Foods Schools participating in NSLP and SBP receive USDA Foods, called entitlement foods Schools may choose to process USDA Foods – Food safety concerns (most items come fully cooked) – Difficult to use food items in raw form – More varied higher quality meals – Reduction in prep time and waste – Portion control – Product consistency (i.e., getting same chicken nugget each time) – Cost (labor cost associated with processing)

34. Resource Tip: New FD Policy Memo on Soliciting Bids from Commercial Distributors for End Products (FD-119) (http://www.fns.usda.gov/fdd/policymemo/pmfd119_NSLP_PROC- SolicitingBids.pdf)http://www.fns.usda.gov/fdd/policymemo/pmfd119_NSLP_PROC- SolicitingBids.pdf

35. Resource Tip: FD Policy Memo on Further Clarification in Crediting for, and Use of, Donated Foods in Contracts with Food Service Management Companies (FD-110) (http://www.fns.usda.gov/cnd/governance/Policy- Memos/2011/SP05%20-2011_os.pdf)http://www.fns.usda.gov/cnd/governance/Policy- Memos/2011/SP05%20-2011_os.pdf

36. Questions?