Overview of Procurement Requirements

1. Overview of Procurement Requirements NJ SNA – USDA-FNS April 2017

2. What is Procurement? The act of obtaining goods or services in exchange for money or value

3. Why Is Competition Important? • Full and open standard of competition was established so that the procurement processis open to all capable contractors wanting to do business with the Federal Government. • Ensures organizations receiving Federal funds use funds efficiently and get best products/services at lowest cost. • Full and open competition means qualified contractors have same opportunity to compete for business.

4. Embracing Competition • If the “playing field” is level, vendor participation is encouraged • The cost of products and services will be lower in price • Better quality products and services result

5. Procurement: A Multi-Step Process • Procurement procedures • Forecasting • Selecting the proper procurement method • Developing a solicitation • Advertising the solicitation • Evaluating proposals/offers • Awarding the Contract • Managing the Contract

6. Procurement Procedures What are they? • The LEA’s (local educational agency’s) written document that describes the procurement procedures to be followed when the LEA conducts procurements using Federal funds.

7. Procurement Procedures • Why are they important? • Required by regulations • Determine procurement methods to be used • Identify a plan to be followed when goods/services are needed • Include a written code of standards of conduct to prohibit conflicts of interest

8. FORECASTING

9. Before beginning the purchasing process… An SFA must plan and evaluate: • Food service operations • Food service needs

10. Forecasting: Evaluate Operations • Evaluate the current and future food service operation to determine needs • Self-Op/Central Kitchen/FSMC • Storage capacity • Processing abilities • Resources - financial, staff, other • Food safety practices • Prior year menus • Inventory

11. Selecting the Proper Procurement Method Informal: • Micro-purchasing • Small Purchase Procedures Formal: • Competitive Sealed Bidding • Competitive Proposals

12. Micro-purchasing • Purchase of goods/services, the aggregate dollar amount of which does not exceed $3,500 • May procure from single source without competition • Price must be reasonable • Must distribute micropurchases among qualified suppliers • Document purchases and price

13. Micro-purchasing (Cont.) • “Aggregate” means the total dollar amount purchased in a single transaction from a supplier. It is not tied to a time period. • The micro-purchase method may not be used in lieu of applicable procurement methods that may achieve a more economical approach. • SFAs may not break-up procurements arbitrarily to stay below the micro or small purchase threshold.

14. Small Purchase Procedures • NJ’s small purchase threshold is: • $40,000 with qualified purchasing agent (QPA) • $29,000 without QPA • Obtain price quotes from an adequate number of qualified suppliers (at least 2, preferably 3) • Document purchase!

15. Formal Procurement Methods • Value of purchase exceeds NJ’s small purchase threshold ($40,000 with QPA/$29,000 without QPA). • More rigorous and prescriptive: • Competitive Sealed Bidding (i.e., IFB) – lowest responsible and responsive bid • Competitive Proposals (i.e., RFP) – identifies evaluation factors and their relative importance, cost primary

16. Steps in Formal Procurement • General Solicitation Process • Forecasting/Cost Analysis • Solicitation Development • Advertising the Solicitation • Evaluation and Award • Contract Management

17. Forecasting & Cost/Price Analysis (2 CFR Part 200.323) • SFA must perform a cost or price analysis for all procurements that exceed the applicable small purchase threshold. • Make independent estimates of costs/prices before receiving bids or proposals, using market reports, etc. • SFA must maintain documentation

18. Sections of a Solicitation • Contract Type (e.g. IFB fixed price, RFP fixed price, RFP cost-reimbursable) • Introduction/Scope • General Descriptions of Goods and Services • Timelines and Procedures • Technical Requirements • Evaluation Criteria (for RFP only) • Misc. Required Fed/State/Local provisions

19. Don’t Restrict Competition! • Place unreasonable requirements on firms • Require unnecessary experience or excessive bonding • Specify only brand name products without allowing “an equal” product • Have organizational conflicts of interest

20. Don’t Restrict Competition! (Cont.) • Product requirements which unduly restrict competition • Make arbitrary decisions in the procurement process • Allow potential contractors to write or otherwise influence bid specifications • Provide insufficient time for vendors to submit bids

21. Solicitations must include: • A clear and accurate description of the requirements for the product or service to be procured. (IFB & RFP) • All requirements which offerors must fulfill and all factors used in evaluating offers. (IFB & RFP) • All evaluation factors and their relative importance, with price as the primary factor (RFP only)

22. Product/Service Descriptions • Include specifications for: • Food: name, grade, weight, size, quality, quantity, variety, packaging, nutrition standards, delivery requirements, safety standards, farming practices, Buy American. • Supplies: name, size, quality, packaging, etc. • Equipment: utility and space requirements, quality and features required, installation requirements. • Services: identify scope of services and all responsibilities requested.

23. Solicitation Evaluation Method: Invitation for Bid (IFB) • Must result in firm fixed price contract awarded to responsive and responsible bidder lowest in price. • For multi-product IFBs, awards can be by line item, food grouping (lot), or total bottom-line.

24. Responsive and Responsible Responsive Vendor provided all information required by the solicitation and product or service meets the SFA’s specifications and requirements. Responsible Vendor possesses the ability to perform successfully under the terms and conditions of the procurement. Examine the vendors - • Integrity; • Compliance with public policy; • Record of past performance; and • Financial and technical resources

25. Solicitation Evaluation Method: Request for Proposal (RFP) • Contract awarded to responsible firm whose proposal is most advantageous to the program, price and other factors considered. • Price must be primary factor, i.e. weighted higher than the other factors.

26. RFP’s Technical Evaluations Must Include: • How respondents address the criteria • How the criteria are scored • How the criteria are weighted • Composition and process for panel evaluation

27. Cost-Reimbursable Contracts- Definition (§210.2) A contract that provides for payment of incurred costs to the extent prescribed in the contract, with or without a fixed fee.

28. Cost-Reimbursable RFPs/Contracts – Special Requirements • Allowable costs will be paid from the nonprofit school food service account to the contractor net of all discounts, rebates, and other applicable credits accruing to/received by the contractor. • Contractor must identify or exclude unallowable costs from invoices.

29. Cost-Reimbursable RFPs/Contracts – Special Requirements (Cont.) • Contractor must identify the amount of each discount, rebate, and other applicable credit on bills/invoices presented to SFA for payment and identify the amount as a discount, rebate, or type of credit. • If approved by S/A, the SFA may allow reporting of this information less frequently than monthly but no less frequently than annually.

30. Cost-Reimbursable RFPs/Contracts – Special Requirements (Cont.) • Contractor must identify the method used to report discounts, etc. that are not reported prior to the end of the contract. • Contractor must maintain documentation of costs, discounts, rebates, and other applicable credits, and must provide upon request to the SFA, S/A, or USDA.

31. Prohibited Cost Arrangements • Cost-Plus-a-Percentage-of-Cost contracts are prohibited (2 CFR Part 200.323(d)). • In Food Service Management Company (FSMC) contracts, cost-plus-a-percentage-of-cost and cost-plus-a-percentage-of-income provisions are prohibited (7 CFR 210.16(c)).

32. Buy American • Solicitations and contracts should include “Buy American” requirement. • SFAs shall purchase, to the maximum extent practicable, domestic commodities or products.

33. Buy American In the event the vendor cannot comply with Buy American, the solicitation must require vendors to : • Consider alternative products and document accordingly • Document when one of the following exceptions are used: • Cost of US product is significantly higher • Food product is not sufficiently produced in US

34. Required Provisions for Solicitations and Contracts • Solicitations and contracts using Federal grant funds must include the provisions listed in Appendix II of 2 CFR Part 200

35. Procuring Processed USDA Foods End Products • General Requirement: Processed USDA Foods (commodities) end products must be obtained by SFAs using proper procurement procedures. • Regulation (7 CFR 250.30(c)(2)): “Recipient agencies which purchase end products produced under Statewide agreements are … required to comply with 2 CFR part 200, subpart D and USDA implementing regulations at 2 CFR part 400 and part 416.”

36. Procuring Processed USDA Foods End Products - Procedure • SFA forecasts products needs for next SY. • SFA develops and issues solicitation, usually an IFB, for processing contract either directly to manufacturers or through prime vendors/distributors. • SFA publicizes solicitation. • SFA evaluates bids and awards to one or more processors or distributors. • SFAs informs the SDA of the commodities and quantity to be sent to the processor.

37. Procuring Processed USDA Foods End Products – Procedure (Cont.) • SDA combines orders for SFAs and ships raw USDA Food products to processors chosen by SFAs. • SFA places orders with processors or distributors for products and draws down entitlement. • Processors/distributors invoice SFA for products delivered. • SFA receives value of commodities through fee for service, discounts, rebates, or net off invoice.

38. Procuring Processed USDA Foods End Products - Incorrect Procedure • SFAs do not conduct procurement process and assume that SDAs are procuring on their behalf. • SDAs send raw product to processors based on orders from SFAs or past purchases. • Orders and deliveries may not reflect what is actually ordered in the next SY, causing processors to have excess end products for which they are not paid. • SFAs are not committing to ordering a specific quantity of product. • Processors do not give a good price for the product when there is no guarantee of volume.

39. Procurement Reviews

40. Goals of Procurement Reviews • To assess procurement procedures to maximize full and open competition • To identify and document noncompliance with procurement standards • To provide technical assistance • To establish and implement corrective actions if required

41. Preparing for Procurement Reviews • Code of Conduct • Procurement Procedures • Vendor Paid List • SFA Procurement Table

42. Vendor Paid List • Summary of expenses by vendor • Includes all purchases paid from nonprofit food service account for prior SY

43. SFA Procurement Table • SFA records all procurements • Reflects prior school year • Used to select procurements for review

44. Categories of Procurement(Thresholds) • Micropurchase ($3,500) • Small Purchase ($29,000 without QPA; $40,000 with QPA) • Formal • FSMC • Processing

45. Micropurchase - Documentation • Purchase Orders • Receipts • Invoices

46. Small Purchase - Documentation • Solicitation Documents • Bid Quotes/Responses • Evaluation of Responses • Contracts • Purchase Orders • Receipts/Invoices

47. Formal Procurement - Documentation • Solicitation Documents • Bidder Response • Evaluation • Executed Contract • Contract Renewal/Amendment • Cost/Price Analysis • Invoices • Non-competitive Proposal Authorization, if applicable

48. FSMC - Documentation • Solicitation Documents • Bidder Response • Evaluation Documents/Scoring Sheets • Notification of Rejected Bids/Offer • Contracts, Renewals and Amendments • Invoices • USDA Foods Credits • Reconciliation of discounts, rebates, credits, as applicable

49. Processing Contracts - Documentation • SDA template agreement/contract for processors • SDA list of approved foods for processing • SFA Planned assistance level (from prior school year) • SFA Solicitation documents, vendor bids/responses, evaluation for contract award and executed contracts for selected vendors • Contract Renewals/addenda/amendments, if applicable • Reconciliation of USDA Foods received