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Child Nutrition Program Purchasing Regulations and Processes Part 2 – Federal Procurement Laws and Regulations

Child Nutrition Program Purchasing Regulations and Processes Part 2 – Federal Procurement Laws and Regulations. Distance Education Workshop February 5, 2009 Wanda Shockey, MEd, RD, LD. Federal Procurement. Laws & Regulations . Federal Regulations & Ethics for Child Nutrition Programs.

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Child Nutrition Program Purchasing Regulations and Processes Part 2 – Federal Procurement Laws and Regulations

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  1. Child Nutrition Program Purchasing Regulations and ProcessesPart 2 – Federal Procurement Laws and Regulations Distance Education WorkshopFebruary 5, 2009Wanda Shockey, MEd, RD, LD

  2. Federal Procurement Laws & Regulations

  3. Federal Regulations & Ethics for Child Nutrition Programs • 7 CFR Part 210 – School Lunches • 7 CFR Part 220 – School Breakfast • 7 CFR Part 3015 - Procurement • 7 CFR Part 3016 - Procurement • OMB CIRCULAR A-87

  4. Open and free competition Prohibited practices Written procedures Award criteria Available methods Code of conduct Affirmative contracting Prohibited costing methods Recordkeeping Contract termination Access to records Contract administration Certifications and clauses Federal Regulations Apply to:

  5. KEY POINTS • 7 CFR Part 3015 & 3016 • Available methods • Code of conduct • Affirmative contracting • Prohibited costing methods • Recordkeeping • Contract termination • Access to records • Contract administration • Certifications and clauses

  6. KEY POINTS • Main Difference • Between 3015 & 3016 • 7CFR 3016 has procurement: • Suspension & Debarment Regulations

  7. Differences in Small Purchase Threshold • Part 3015 Less than $10,000 • Part 3016 • Less than $100,000 • Local public agencies/School Districts: Lower threshold of State, District or Federal Requirement

  8. Anti-competitive Practices • Revised A-110 Provision: To eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, invitations for bid and/or requests for proposals shall be EXCLUDED from competing for such procurements

  9. Vendor or ManufacturerCannot Develop Bid Specifications • 7 CFR Part 3016.60(b) prohibits awarding contracts to any entity that develops or drafts specifications, requirements, statements of work, invitations for bids, requests for proposals, contract terms and conditions or other procurement documents. • While schools have broad discretion in gathering information for use in connection with procurements, information from potential bidders must be appropriately modified to develop tailored specifications, otherwise these bidders must be excluded from competing for such procurements. • Any action which diminishes open and free competition seriously undermines the integrity of the procurement process and may subject the SFA to bid protests.

  10. Escalation/De-escalator Clause • Provision in a contract for increasing or decreasing the contracted price for labor, raw food,material, etc., in step with the market prices or an agreed upon benchmark such as consumer price index (CPI). • Contract management responsibility of SFA/District REQUIRES monitoring and application of the de-escalation (price-reduction) clause as well as the escalator clause.

  11. Selection Procedures 7 CFR Part 3016.36 (c) (3)(i)The request for proposal (RFP) or invitation to bid shall: "incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not… contain features, which unduly restrict competition." • 7 CFR Part 3016.36 (c) (3) (ii)The RFP or invitation to bid shall: "Identify all requirements which offerors (vendors) must fulfill and all other factors to be used in evaluating bids or proposals."

  12. Protest Procedures • Pursuant to 7 CFR 3016.36(b)(12), SFAs/Districts must have protest procedures in place to handle and resolve disputes relating to their procurements and must in all instances disclose information regarding a protest to their State agency.

  13. Code of Conduct – 7 CFR 3016 • 7 CFR Part 3016.36 (b) (3) A School Food Authority (local school district) “will maintain a written code of conduct governing the performance of their (SFA) employees engaged in the award and administration of the contract. No employee …shall participate in selection or in the award or administration of a contract supported by Federal fundsif a conflict or interest, real or apparent would be involved.“ • 7 CFR Part 3016.36 (b) (3) (iv) This regulation states: "…employees…will neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, potential contractors, or parties….“

  14. Contract Management MATERIAL CHANGE TO A BID AWARD OR CONTRACT A material change can be thought of as a change made to a contract after it has been awarded that alters the terms and conditions of that contract substantially enough, to the extent that had other bidders known of these changes in advance, they could have bid differently and more competitively.

  15. Access to Contractor Records • 7 CFR Parts 3016.36 (i) (10) "Access by the grantee (state agency), the Federal grantor agency (USDA), the Comptroller General of the United States, or any of their duly authorized representatives to any books, documents, papers, and records of the contractor which are directly pertinent to that specific contract for the purpose of making audit, examination, excerpts, and transcriptions.” • 7 CFR 3016.36 (i) (11)Regulations require “ retention of all required records for three years after … the final payments and all other pending matters are closed.” Arkansas Law requires 5 years from final transaction!!

  16. Newest Federal Procurement Changes Revisions to Federal Procurement Regulations for Child Nutrition: Formal Announcement by USDA 1/28/08 FINAL RULE effective November 30, 2007 Clarifications began July 2008 and are continuing:

  17. Major Changes in Final Procurement Rule: • The rule explicitly: • (1) limits an SFA’s use of nonprofit school food service account funds to costs resulting from proper procurements and contracts; (Violations of Procurement Regulations --- can not pay for purchases out of school nutrition programs) • (2) requiresthat allowable costs paid from the nonprofit school food service account be net of all discounts, rebates, and applicable credits; and • (3) requires State agencies to review and approve SFA procurements of food service management companies’ services in advance of contract execution.

  18. State Agency Responsibilities • New Regulations 7 CFR 210. 21 Subpart E. (c) (1) More Clearly Define the State Agency Responsibilities to: • ADE, CNU may impose a pre-issuance review on a school food authority (SFA) proposed procurement. • The SFA must make available, upon request by the state agency, its procurement documents, including but not limited to solicitation documents, specifications, evaluation criteria, procurement procedures, proposed contracts, and contract terms. • SFA shall comply with State Agency requests for changes to procurement procedures and solicitation and contract documents to ensure that, to the State agency’s satisfaction, such procedures and documents reflect applicable procurement and contract requirements and the requirements of this part.

  19. State Agency Responsibilities 7 CFR 210. 21 Subpart E. (c) (2) and (3): (2) Prototype solicitation documents and contracts. The SFA must obtain state agency’s prior approval for any change made to prototype solicitation or contract documents before issuingthe revised solicitation documents or execution of the revised contract. (3) Prohibited Expenditures. No expenditure may be made from the nonprofit school food service account for any cost resulting from a procurement failing to meet the requirements of this part.

  20. Federal References on CNU Website: • January 23, 2009 USDA  Economic Price Adjustments in Vendor Contracts - SP-10-2009  http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_10-2009_os.pdf 2. January 15, 2009 USDA Competitive Procurement and Private Grants for School Food Programhttp://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_09-2009_os.pdf • January 9, 2009 Procurement Questions http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_08-2009_os.pdf Special Note: Southwest Region Office Released 1/16/09 as 2009-SP-11 4. July 9, 2008 USDA Applying Geographic Preferences in Procurements for the Child Nutrition Programs http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2008/SP_30-2008.pdf • July 1, 2008 USDA CN Labeling Process and Applicationhttp://www.fns.usda.gov/cnd/CNlabeling/default.htm • January 28, 2008( Effective Nov. 30, 2007)Final Rule, Procurement Requirements for the National School Lunch, School Breakfast and Special Milk Programs http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2008/SP_09-2008-OS.pdf

  21. Past Federal Rule for Non-geographic Preference • 7 CFR Part 3016.36 (c) (2)A School Food Authority (local school district) “will conduct procurements in a manner that prohibits the use of statutorily or administratively imposed in-State or local geographical preferences in the evaluation of bids or proposals…” Slightly changed by US Farm Bill 2008

  22. Farm Bill Change: FNS guidance (USDA Memo SP-08-2009, Procurement Questions, See Answer to Question #2: • New flexibility for application of “Geographic Preference may only be applied to the procurement of unprocessed agricultural products which are locally grown and locally raised, and that have not beencooked, seasoned, frozen, canned, or combined with any other products.”

  23. Joint Explanatory Statement in Farm Bill to Support Local Farmers • Farm Bill legislation states “that de minimis handling and preparation might be necessary to present an agricultural product to a school food authority in a useable form, such as washing vegetables, bagging greens, butchering livestock and poultry, pasteurizing milk, and putting eggs in a carton.”

  24. Farm Bill Change to Geographic Preference Federal Law Takes Precedent over State Law • 2008 Farm Bill states that school districts can: • Elect to apply geographic preference for ONLY locally produced farm products that are minimally processed. (Local District Option) • Define the term “locally produced” at district discretion, but cannot limit competition by choice of definition. (Local Option) • Not apply preference to locally produced foods that are chopped, cut, diced or sliced products. Reference: USDA Memo 2009-SP-11(January 9, 2009)

  25. Procurement Fees • “Any fee (including a procurement fee) that is directly tied to the amount of discounts, rebates, and applicable credits to be returned to the SFA is an unallowable non-profit school food service account cost ….” • Source: USDA Memo SP-15-2008

  26. Procurement Fees – cont… • “A fee structured in this way is clearly intended to return some or all of the discounts, rebates, and applicable credits to the company with whom the SFA has contracted for services rather than to ensure that they accrue to the non-profit school food service account.” • This is true whether the fee is set forth in the solicitation/contract or not. • Source: USDA Memo SP-15-2008

  27. Fixed Procurement Fees • The procurement fee could be a separate fee or part of another contract fee, as long as it remains fixed.

  28. Procurement FeesTracking Applicable discounts, rebates • 12) Question: What if the contract contains the language for the return of rebates, discounts, and applicable credits, but does NOT contain a provision including the methodology for tracking how the invoices will identify these rebates? • USDA ANSWER: The rule requires contractors to provide sufficient information to permit the school food authority to identify allowable and unallowable costs and the amount of all such discounts, rebates and credits on invoices and bills presented for payment to the SFA. It is not likely that this addition to the contract would create a material change or alter the financial structure. This may be accomplished by creating an amendment to the contract which accounts for the tracking of these rebates. However, State approval should be sought. January 9, 2009 Procurement Questions http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_08-2009_os.pdf Special Note: Southwest Region Office Released 1/16/09 as 2009-SP-11

  29. CN LABEL CHANGE • Declaration Statements • After July 1, 2008, all new CN label applications are required to contain CN crediting statements that reflect the full contribution of the food based component provided by the formulation. • Example: A pizza formula with crust (made with creditable grain), tomato paste and cheese must declare the maximum allowable credit for the meat/meat alternate, vegetable, and bread alternate components. • This requirement means that the CN statement must declare all contributions of a given formula to the fullest extent possible. If a formulation provides 1/8 cup of vegetable from tomato paste, it must be declared in the CN statement. Likewise, if a pizza crust contributes five servings of bread alternate, then the CN statement must declare all five servings.

  30. AM I WORKING HARD???

  31. Close Your Eyes and Breathe!!!

  32. COOPERATIVE PURCHASING BENEFITS Higher Quality Products Lower Prices Reduced Administrative Costs • Improved Nutritional Benefits

  33. COOPERATIVE PURCHASING MAJOR CONCERN • Failure to properly procure goods • Causes: • Pre-procurement process breakdowns • Code of conduct violations

  34. Cooperative Purchasing • Question: Can an SFA purchase directly from a Buying Organization or Group? • USDA Answer: LEA/SFA’s (school districts) are not prohibited from purchasing from a buying organization or group, as long as they comply with the government-wide procurement rules at 7 CFR 3016. However, an SFA cannot purchase directly from a buying organization without considering other sources. Depending on whether the procurement is informal or formal, the appropriate competition must take place to ensure that the SFA is obtaining the lowest responsive bid or offer. Joining or procuring directly from a buying service without opening up competition to other like sources does not ensure that the lowest responsive bid or offer has been obtained. The prices of a buying group or organization could be factored in and assessed against other bidders or offerors. Source:January 9, 2009 Procurement Questions http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_08-2009_os.pdf Special Note: Southwest Region Office Released 1/16/09 as 2009-SP-11

  35. COOPERATIVE PURCHASINGSERVICE PROVIDER ISSUES • Problems with competitive procurement requirements • Noncompetitive purchases from suppliers with pre-existing relationships • Purchases beyond scope of contract

  36. You CAN Meet the Challenges!!!

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