FAQS - Procurement

 

1.	What are the available procurement methods in the school meals programs?
		When using nonprofit food service account funds, School Food Authorities (SFAs) must follow their own State and local rules except where those rules are inconsistent (less restrictive) with the federal requirements. In those cases, the SFA must substitute and follow the more restrictive federal requirements at 7 CFR 3016 and 3019. When procuring goods and services for the school meal programs, an SFA must determine whether they will use an informal or formal method of procurement. It is important for SFAs to understand and then identify which method best meets the needs of their food service operation. The procurement methods are designed to provide free and open competition and ensure that Federal funds—when used to purchase products or services—result in the best and most responsive product at the lowest possible price.
2.	What is the informal procurement method?
		The informal procurement method is formally known as the small purchase or simplified acquisition threshold. The small purchase method is a relatively simple and informal procurement method that is appropriate for a procurement of goods and services costing not more than $100,000 (the current Federal small purchase threshold), or a lesser amount specified by State law or local requirements. Though procurements conducted using the small purchase threshold follow a less rigorous process than the formal methods of sealed bidding or competitive negotiation, competition is still required. SFAs must always adhere to procurement regulations when purchasing any amount of goods or services using nonprofit school food service account funds. While relatively simple and less formal than the formal methods of procurement, the informal method of procurement still requires that the SFA compete for goods or services using an appropriate solicitation document and competitive process. The SFA must develop a written solicitation to identify the number, quality and type of goods or services needed and use the solicitation to solicit goods or services from each potential offeror. Unlike the formal procurement methods which require public advertisement, when using an informal method an SFA may directly contact potential competitive sources. The decision whether to formally advertise or simply contact three or more potentially qualified sources is left up to the SFA. SFAs must check with their administering State agency and local officials to determine the small purchase procedures that must be followed in their respective state or district. State and local regulations may set the simplified acquisition threshold at a lower, more restrictive level than the federal threshold (for example, $50,000 State threshold instead of the Federal threshold of $100,000). State and local agencies are encouraged to assess their current small purchase regulations and evaluate if their threshold best fits their needs.
3.	What are the formal procurement methods?
		If the value of an SFA’s procurement meets or exceeds the applicable federal, state, or local threshold for small purchases, the SFA must use the formal, more rigorous method of procurement. The two formal procurement methods available are Competitive Sealed Bidding, commonly referred to as sealed bidding, and Competitive Proposals, formerly called competitive negotiation. The first formal method of procurement is: Competitive Sealed Bids, i.e. an invitation for bid (IFB). The competitive sealed bid is a method of procurement in which sealed bids are publicly solicited (i.e. through an invitation for bid) resulting in the award of a firm-fixed price contract, fixed price contract with economic price adjustment or fixed price contract with prospective price redetermination, to the responsible bidder whose bid is responsive to the invitation for bid IFB, conforms with all the material terms and conditions of the invitation for bids, and is lowest in price. In this case, the IFB must be publicly advertised and bids must be solicited from an adequate number of known suppliers, providing them with sufficient time to respond prior to the date set for opening the bids. Competitive sealed bidding is used when: Complete specifications or descriptions of the product or service are available or could easily be developed by the SFA; The responsive bids will differ along no dimension other than price; and There is thought to be more than one qualified source to be willing and able to compete for the award. The second formal method of procurement is: Competitive Proposals, i.e. a request for proposal (RFP). The competitive proposal is a method of procurement whereby a technical proposal is solicited that explains how the prospective contractor will meet the objectives of the solicitation and a cost element that identifies the costs to accomplish the technical proposal. While price alone is not the sole basis for award, price remains the primary consideration when awarding a contract under the competitive proposal method. Competitive negotiation is used when the SFA lacks specificity and is requesting goods and services that are not “one size fits all.” Another indicator that an SFA should use the competitive negotiation method of procurement is when expectations can be identified, but more than one method can be used to achieve the SFA’s desired outcome. In the case of an RFP, criteria allows for the measurement of factors that differ along other dimensions than just price. The use of competitive negotiation requires that sufficient skill and expertise be available to allow for proper evaluation of the proposals and to conduct negotiations with top offerors. For additional information on each of these procurement methods in your state, please contact your State Agency.
4.	Can school food authorities (SFAs) split up large purchases into smaller amounts and thereby fall under the small purchase threshold?
		No, SFAs cannot intentionally split purchases in order to fall below the federal small purchase threshold in an effort to avoid more rigorous procurement practices. However, there may be some instances in which a segment of the marketplace supports the need to separate products from the overall food procurement. For example, milk and bread are commonly procured separately because there are fundamental differences between them and other food products, such as shorter shelf-life, different pricing mechanisms, durability, and, in some cases, having a clearly defined local market due to their distinctive characteristics. Similarly, an SFA may find that fresh produce may be considered a separate market given that it shares similar characteristics as bread and milk. The following are two examples that may help an SFA to purchase local produce: If a state’s small purchase threshold is $100,000 and an SFA will be purchasing $150,000 worth of items for the salad bar, they cannot split the purchase into two purchases of $75,000 each to fall below the state’s threshold. However, an SFA’s purchase of produce may constitutes a separate market due to its shelf life and pricing structure, and therefore the SFA may be able to separate out the procurement of the fresh produce which may, under the small purchase threshold, allow them to contact three local vendors rather than conducting a formal procurement. Please keep in mind that every produce purchase does not necessarily constitute a separate market, thereby justifying a separate procurement for the local produce. For example, a school regularly purchases apples as part of their larger food procurement from a distributor. The apples purchased for the program may not necessarily constitute a separate market, as they have a longer shelf life than other produce and may easily be provided fresh from a distributor at a reasonable cost. Each SFA must carefully assess their own particular purchasing mechanisms and methods, and determine what is reasonable in the situation. If an SFA is participating in a curriculum related activity such as a “Harvest Week” where it is necessary to procure specific food items, it may make sense for the SFA to conduct a separate procurement for those specific products. If this procurement does in fact fall below the small purchase threshold, the SFA will be able to procure through the informal procurement method which may facilitate their purchasing process.
5.	Do procurement rules and regulations prohibit a school food authority (SFA) from purchasing locally?
		No, but in properly following the regulations, an SFA must ensure that they do not restrict competition. Some examples of unallowable practices that restrict competition include: Unreasonable requirements – placing unreasonable or overly restrictive requirements on suppliers in order for them to qualify to do business, e.g., requiring unnecessary experience or bonding requirements. Noncompetitive practices – encouraging noncompetitive practices, e.g., collusion between vendors or farmers. Failing to adequately advertise and solicit prices could encourage potential suppliers to manipulate their bid prices. Conflicts of interest – allowing conflicts of interest to occur. Conflicts of interest are present when a less than arms-length transaction takes place. This can occur when the individual(s) responsible for determining bid/proposal responsiveness can be overruled by other individuals within the organization, e.g. Board members, or if the individual responsible for determining responsiveness (or any member of his/her family) has any personal or financial interest in any of the offering firms. Using a respondent’s bid specifications – using bid specifications or contract terms written by a potential contractor. A person that develops or drafts specifications, requirements, statements of work, invitations for bids, requests for proposals, contract terms and conditions or other documents for use by an SFA in conducting a procurement under the USDA entitlement programs shall be excluded from competing for such procurements. Insufficient time – not allowing bidders/offerors sufficient submission time when soliciting the invitation for bid or request for proposal. Geographic preferences – using in-state or local geographic preferences that are not in keeping with the new regulations established by the Farm Bill of 2008. Applying Geographic Preference Option Please note: FNS policy memorandum SP 18-2011, Procurement Geographic Preference Q&As, issued February 1, 2011, provides answers to common questions on the application of the geographic preference option in the procurement of unprocessed locally grown or raised agriculture products.
6.	What does the 2008 Farm Bill mean for school districts?
		When purchasing locally, it is important to understand the regulations of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246), also known as the Farm Bill, which applies to procurements in the Child Nutrition Programs. Section 4302 of the Farm Bill amended section 9(j) of the Richard B. Russell National School Lunch Act to require the Secretary of Agriculture to encourage institutions operating the Child Nutrition Programs to purchase unprocessed locally grown and locally raised agricultural products. This means that institutions receiving funds through the Child Nutrition Programs may now apply a geographic preference when procuring unprocessed locally grown or locally raised agricultural products. This applies to operators of all of the Child Nutrition Programs, including the National School Lunch Program, School Breakfast Program, Fresh Fruit and Vegetable Program, Special Milk Program, Child and Adult Care Food Program, and Summer Food Service Program, as well as to purchases of fresh produce for these programs by the Department of Defense. It is important to remember that when a school food authority (SFA) chooses to purchase from local producers, they must still observe all the regulations that apply when purchasing food for the school meal programs using nonprofit school food service account funds. These procurement regulations are in place to ensure that Federal funds, when used to purchase products or services, result in the best and most responsive product at the lowest possible price. For a list of the memos outlining the rules for applying a geographic preference when purchasing locally grown unprocessed agricultural products, please visit the Policy page.
7.	Does the Farm Bill require schools to purchase local, unprocessed products?
		No. While the statute permits institutions to apply a geographic preference to the maximum extent practicable and appropriate, it does not require institutions to purchase locally grown and locally raised agricultural products, or to apply a geographic preference in their procurements of these products. Moreover, States cannot mandate through law or policy that institutions apply a geographic preference when conducting these procurements; the National School Lunch Act grants this authority directly to the institutions. The institution responsible for the procurement has the discretion to determine whether and how a geographic preference meets its needs.
8.	What types of products do the Farm Bill’s geographic preference regulations pertain to?
		Geographic preference may only be applied to the procurement of unprocessed agricultural products which are locally grown and locally raised. According to the Geographic Preference Option for the Procurement of Unprocessed Agricultural Products in Child Nutrition Programs final rule, issued on April 22, 2011, “’unprocessed locally grown or locally raised agricultural products’ means only those agricultural products that retain their inherent character. The effects of the following food handling and preservation techniques shall not be considered as changing an agricultural product into a product of a different kind or character: cooling; refrigerating; freezing; size adjustment made by peeling, slicing, dicing, cutting, chopping, shucking, and grinding; forming ground products into patties without any additives or fillers; drying/dehydration; washing; packaging (such as placing eggs in cartons), vacuum packing and bagging (such as placing vegetables in bags or combining two or more types of vegetables or fruits in a single package); the addition of ascorbic acid or other preservatives to prevent oxidation of produce; butchering livestock and poultry; cleaning fish; and the pasteurization of milk.”
9.	Can a school food authority (SFA) purchase food directly from a farmer?
		Yes, as long as the SFA observes all the regulations that apply when purchasing food using nonprofit school food service account funds. This can be found at 7 CFR 210.21, 7 CFR 220.16, and 7 CFR 3016.36. Procurement regulations are in place to ensure that Federal funds, when used to purchase products or services, result in the best and most responsive product at the lowest possible price. The most important principle of procurement is that it must always be conducted in a manner that provides maximum free and open competition. Free and open competition means that all suppliers are “on a level playing field” with the same opportunity to compete. Procurement procedures must not restrict or eliminate competition. While a geographic preference may be used to encourage the purchase of locally grown and locally raised products by enabling an institution to grant an advantage to local growers, this provision does not eliminate the requirement for procurements to be conducted in a manner that allows for free and open competition, consistent with the purchasing institution’s responsibility to be responsible stewards of federal funds. Please see the Procurement Methods Section of these FAQs for examples of how this procurement may work.
10.	According to the 2008 Farm Bill regulations, institutions receiving funds through the Child Nutrition Programs may apply a geographic preference when procuring unprocessed locally grown or locally raised agricultural products. Does this mean competition does not need to occur and schools can simply pick a farmer to provide them with fresh, unprocessed vegetables?
		No. The most important principle of a good procurement is that it is competitive and allows for free and open competition. When using a geographic preference to procure locally unprocessed agricultural products, competition still must occur. However, the way in which a geographic preference is applied depends on whether the procurement method is informal or formal. If using the informal method, i.e. when procuring items which fall under the small purchase threshold, an institution must still develop a written specification document outlining the products they are seeking. The institution should get price quotes from at least three sources/farmers when procuring unprocessed locally grown or locally raised agricultural products, so that competitors have an opportunity to compete for the bid. Competition is maintained by comparing the price quotes from the sources to the SFA’s developed specification, to determine which bidder is the most responsive and responsible. If the procurement exceeds the small purchase threshold, a formal procurement method must be used. This involves the sealed bidding process (i.e. IFB) or the competitive negotiation process (i.e. RFP). This would entail public notification of the solicitation developed by the SFA. In the scoring criteria contained in the solicitation, the SFA can incorporate the use of geographic preference points into the criteria. This indicates to bidders that—upon the SFA’s scoring of their solicitation for locally unprocessed agricultural products—preference points may be granted to the local sources/farmers who respond to the solicitation and are able to provide the requested unprocessed agricultural products.
11.	How is “local” defined in the geographic preference option?
		Due to the geographic diversity in each state, the institution responsible for the procurement such as a school food authority (SFA) making the purchase or the State agency (SA) making purchases on behalf of SFAs, has the discretion to define the area for any geographic preference (e.g., State, county, region, etc.). However, it is important to keep in mind that local preference should not be defined in a way that unnecessarily limits competition.
12.	How does the option of geographic preference for local foods purchases apply to purchasing from a distributor rather than directly from a farmer?
		As amended by the 2008 Farm Bill, the National School Lunch Act allows institutions receiving funds through the Child Nutrition Programs to apply a geographic preference when procuring unprocessed locally grown or locally raised agricultural products. While a geographic preference may only be applied to the procurement of unprocessed agricultural products which are locally grown and locally raised, the amendment does not require the school district to purchase from a particular entity. Local food purchases do not necessarily have to occur directly with a farmer, but may be purchased through a distributor or wholesaler as well.
13.	Will school food authorities be able to use commodity entitlement dollars to purchase locally grown products?
		No, food purchases are made with these funds on behalf of the school food authorities by USDA through the Food Distribution Program (i.e., Commodity Program). In the Food Distribution Program states select from over 180 different types of food products for their schools, child and adult care centers, family day care centers and summer program sites. A school food authority may, however, use Sections 4 & 11 reimbursement funds to competitively procure the purchase of local agriculture products.
14.	Are the Department of Defense Fresh Fruit and Vegetable Program (DoD Fresh Program) vendors encouraged or required to purchase locally?
		DoD   Fresh Program vendors are not required to purchase locally; however, the primary focus of the DoD Fresh Program is to use small produce vendors. Each DoD vendor works with customers in a regional “zone” and may often contract with local vendors. The USDA Farm to School Team continues to research and develop mechanisms for assisting schools in accessing local markets and enabling food producers to effectively service their local schools, including access through the DoD Fresh Program. School food authorities are encouraged to work with their DoD Fresh Program vendor if they wish to purchase locally grown products when available. Many of these vendors have begun tracking this information.
15.	What is being done to educate farmers about USDA’s competitive procurement regulations required for the Child Nutrition Programs?
		Farmers entering into the market of selling their products to schools may not be familiar with the detailed procurement requirements of USDA’s Child Nutrition Programs and should contact the applicable State agency which administers the Child Nutrition Programs for more information on how to sell to school districts. Providing information on USDA’s procurement requirements should happen at several levels. At a Federal level, USDA staff has provided procurement training at national conferences and through an online training course for State Department officials entitled State Agency Guidance on Procurement through the National Food Service Management Institute (NFSMI). State agency officials should contact their Regional Food and Nutrition Service Office for information on how to register for the course. In the near future, the Farm to School Team will host a webinar focusing on procurement requirement, and specifically cover local food purchases. State agencies should provide training and technical assistance to their School Food Authorities on the requirements of proper procurement practices in the Child Nutrition Programs. It is the responsibility of the School Food Authority to follow proper procurement requirements and to be familiar with those requirements. School Food Authorities may need to education their local farmers on the proper procurement practices that must be followed in the Child Nutrition Programs.

Last modified: 01/25/2013