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Alternative Value Pass-Through System Pilot Project under the Department of Defense Fresh Program

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PDF Icon Policy Memo (174.45 KB)
DATE:August 22, 2016
POLICY MEMO:FD –137: Processing
SUBJECT:Alternative Value Pass-Through System Pilot Project under the Department of Defense Fresh (DoD Fresh) Program (Revision 1)

The Food and Nutrition Service (FNS) is interested in increasing access to fresh fruits and vegetables via the DoD Fresh Program for school food authorities (SFA) participating in the child nutrition programs, including the National School Lunch Program and the School Breakfast Program. In order to maximize SFAs’ access to such produce, particularly for smaller SFAs, such as charter schools, which do not have the capacity on-site to directly receive and prepare produce for the meal service, FNS initiated an alternative value pass-through system (AVP) pilot project in accordance with 7 CFR 250.30(d)(1)(iii) in May 2015. In response to feedback from states participating in the pilot over the past year, this revised policy memo requires supplemental reporting from processors and requires state verification of credits provided by the processor to the SFA. Processors wishing to continue participation in the pilot will have to sign the attached revised NPA amendment to extend their participation in the pilot.

The AVP pilot project targets those commercial entities that prepare and plate school meals off-site at a commercial facility, including only DoD Fresh produce and no additional USDA Foods in the meals provided to the SFA. While the commercial entities may have characteristics of food service management companies, they are processors for purposes of this pilot project and pursuant to 7 CFR 250.2.

This pilot serves as a mechanism for these specific processors to facilitate smaller SFAs’ use of DoD Fresh produce in the preparation and service of school meals.  As part of the AVP pilot project, FNS will use the authority in 7 CFR 250.30(q), to waive and modify some requirements for participating processors, as discussed below. The processors will be required to enter into a National Processing Agreement (NPA) with FNS if operating in multiple states or an in-state processing agreement with the state where the processor does business, and will be required to agree to and sign an amendment to the processing agreement.

Under the AVP pilot project, a processor will credit the SFA for the full value of DoD Fresh produce upon receipt from the DoD vendor, based exclusively on the Defense Logistics Agency (DLA) invoice price. For the purposes of the AVP pilot project, a processor may credit the SFA within the billing period in which the produce was received, or on the invoice that pertains to the period in which the produce was received. The credit may not be reduced due to any unaccounted for loss, damage to, or improper use of the DoD Fresh produce which may occur while in the control of the processor. During the pilot project,  participating processors must maintain delivery receipts and/or billing invoices, production records, and/or other documentation as applicable, in accordance with 7 CFR 250.19, to substantiate that SFAs are properly credited for all DoD Fresh produce received by the processors. This AVP pilot project may include all DoD Fresh produce currently available via the DoD Fresh Program, and delivered to off-site processors.

Processors interested in participating in this AVP pilot project must complete, sign, and submit an amendment to the standard NPA or in-state processing agreement to FNS or the state distributing agency, as applicable. Under the amendment, processors would be exempt from requirements related to end product data schedules and monthly performance reports as otherwise required by the NPA.  In order to evaluate the integrity of this alternate value pass-through system, processors must submit a monthly report to the state distributing agency of the credits provided to each SFA participating in the pilot with the processor. State distributing agencies must annually validate the report of credits for one or 10 percent (whichever is greater) of SFAs participating in the pilot in the state. State distributing agencies may include additional reporting requirements or provisions as part of their administration of the pilot project.

To ensure protection of DoD Fresh entitlement resources, processors participating in the AVP pilot project must continue to comply with all inventory protection requirements pursuant to the NPA or in-state processing agreement, as applicable, and in accordance with policy memorandum FD – 134 Processing, Minimum Inventory Protection Requirements for Processors Participating in the National Processing Program (March 21, 2014). In lieu of using monthly performance reports to set bond amounts, under the pilot project, processors must submit to FNS or the state distributing agency, as applicable, a list of all SFAs for which they will be receiving DoD Fresh produce. FNS or the state distributing agency, as applicable, would then establish appropriate bond amounts prior to DoD Fresh produce being received under this AVP system.

FNS will periodically assess this AVP pilot to identify successes and challenges, and determine long-term viability. While the additional flexibility provided by the pilot project will benefit SFAs that may not otherwise be capable of receiving DoD Fresh produce, FNS may close the pilot project should circumstances warrant.

Processors operating in multiple states must obtain approval from USDA FNS to participate in this pilot, via the NPA process and the attached NPA amendment. NPA resources and starter kit can be found on the FNS website by following this link:

The attached NPA amendment provides language which can be used for an in-state processing agreement with some modification, particularly to section citations.

Please submit questions and completed National Processing Agreements to

Laura Castro
Food Distribution Division

Page updated: June 12, 2024

The contents of this guidance document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.