|DATE:||February 13, 2012|
|POLICY MEMO:||FD-119: Processing|
|SUBJECT:||Soliciting Bids from Commercial Distributors for End Products|
FD-119: Soliciting Bids from Commercial Distributors for End Products
The procurement of goods and services in the National School Lunch Program (NSLP) must be conducted in a manner that ensures free and open competition, in accordance with Federal regulations under 7 CFR Part 3016 or 7 CFR Part 3019, as applicable, and must also comply with procurement requirements in 7 CFR 210.21. This is true for procurement of both commercial food products and end products produced through the further processing of USDA donated foods (hereinafter referred to as "end products").
In most cases, school food authorities (SFAs) solicit bids for procurement of commercial food products from commercial distributors and, in a separate solicitation, solicit bids for procurement of end products from processors, even when identical food products are sold commercially through distributors.
In this policy memorandum, we clarify that the SFA may, in some cases, include bids for procurement of end products in its solicitation for procurement of commercial food products from commercial distributors, rather than conduct two separate solicitations. This policy memorandum also clarifies the requirements, and the parties responsible for ensuring compliance with requirements, in exercising such option. Although the memorandum focuses on SFA procurements in NSLP, it is also applicable to procurements conducted by recipient agencies in other child nutrition programs.
- End products must be obtained from a processor that has a state processing agreement (or state participation agreement, as appropriate) with the state distributing agency (SDA)
- Only end products with approved end product data schedules, and that meet substitution and grading requirements in 7 CFR 250.30, may be provided;
- The SF A must receive credit for the value of the donated foods contained in the end products, either through a discount from the gross case price, or a refund or rebate after the sale of the end product
- The distributor must collaborate with the processor to ensure that the SFA is an eligible recipient of end products and to ascertain the quantity of end products, or the value of donated food, for which the SF A is eligible.
- The distributor must provide notification to the processor of end product sales so that the appropriate inventory draw-down may occur.
The SFA must also verify with the SDA the types of approved end products, the quantity of end products that it is eligible to receive, and the value of donated foods contained in the end products. The SDA must ensure that the SFA is aware of any restrictions in the state processing or participation agreement relating to approved end products or methods of end product sales, or other provisions. Such restrictions must be included in the SFA's solicitation for the services of a commercial distributor.
In such cases, the distributor may commingle commercial food products and end products at its facility, and sell such commingled food products to any of its customers. Sales of such food products to the SFA must ensure provision of credit for the value of donated foods for the quantity of end products that the SFA is eligible to receive. However, for end products produced from non-substitutable donated foods (i.e., beef and pork), the distributor must ensure that only the SFA receives such end products.
The distributor must notify the processor of its sales of end products to the SF A in a timely manner, so that the processor may report such sales and reductions of donated food inventories to the SDA in its monthly performance reports. Such notification may be provided by electronic means - e.g., through sales velocity reports or other automated sales reports.
Further guidance on coordination between the processor and distributor in the distributor's sales of end products to SFAs or other recipient agencies may be found in Policy Memorandum FD-007.
Food Distribution Division
Child Nutrition Programs
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.