Procurement: Part 1

1. Procurement: Part 1 Deb Egeland Child Nutrition and Food Distribution Programs Kirsten Baesler, State Superintendent

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

3. Benefits of Proper Procurement • Save time • Save money • Receive the right product • Receive the freshest product • Leaves a paper trail

4. Why is Procurement Important? • USDA Requirement • Good Money Management • Serve the best product possible

5. Background • School nutrition operators and industry have expressed frustration about the lack of knowledge--by all parties—with the procurement process. • Schools follow state and local laws for most procurement, however, food service is under USDA which is federal. • It is a complicated ordeal to get the right product at the right time in the right amount to the child’s plate.

6. WHY A TRAINING ON PROCUREMENT? • Always has been a requirement of program regulations • 7CFR 210.21 (NSLP) • 7CFR 220.16 (SBP) • 7CFR 215.14a (SMP) • 7CFR 225.17 (SFSP) • 7CFR 226.22 (CACFP) • 7CFR 250 – Subpart D (USDA Foods)

7. WHY A TRAINING ON PROCUREMENT? Federal grant management rules • 7 CFR parts 3016, 3019 and 3052 Cost principles • 2 CFR 220 (A-21) • 2 CFR 225 (A-87) • 2 CFR 230 (A-122) New rules • 2 CFR 200

8. WHO SHOULD KNOW THIS INFORMATION? • Sponsors participating in National School Lunch (NSLP) • Superintendents • Business Managers • Food Service Directors • Cooks • Not me, “I’m in the co-op”. Wrong, still need to follow ALL the rules. • Vendors selling to participating sponsors • Distributors • Brokers/Manufacturers • This accounts for 85% of school food, USDA Foods are only 15%.

9. Procurement – What You Need to Know • Understand goods, products, services needed • Potential suppliers of goods, products, services • The best price • Which method of procurement to use • Document the steps involved

10. 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

11. Where Should We Start? We need to understand: • That competition is the basis for procurement rules and embraces the concept of competition • Contract Administration is the umbrella that covers the many steps in the procurement process • The framework and players in the procurement arena

12. What is a Bid? A bid is a contractual procurement agreement between a school foodservice authority and a vendor; • for a specified product, • for a specified time period, • at a specified price, and • a specified quantity. The contract is binding for both parties, even if you change your mind.

13. Bid Evaluation Factors: Get What you Want • Student preference/taste tests • Price (required) • Menu adaptability • Past recall experience/ Quality control testing • Ordering requirements • Packaging • Payment policies • Whatever the district wants, write it in for all bidders

14. Principles of Good Procurement • Free and open competition • Fairness and integrity • Responsive and responsible vendors • Accountable and transparent

15. Accountable and Transparent • The effective use of School Nutrition Funds • State and local officials who administer these programs are accountable to tax payers • Clear • Forthright • Out in the open

16. Competition • Secures the best price for the best quality product or service • Allows companies to differentiate • Prices • Services • Innovation

17. Why Is Competition Important? • The full and open standard of competition was established because of the strong belief that the procurement process should be open to all capable contractors who want to do business with the Federal Government • Free and open competition means that everyone has the same opportunity to compete for business

18. 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

19. Ethics • Important to fair competition • Moral standards used to guide decisions in personal and professional lives • Practices that promote free and open competition • Unethical practices can damage reputations of the person and comp

20. What Are the Basic Requirements? Procurement Review Tool Questions: Is there a Code of Conduct for Procurement? Is all the required language in the Code of Conduct? Are there documented Procurement Policy and Procedures? Does the policy contain all requirements?

21. Code Of Conduct

22. Unacceptable and Illegal Practices • Showing preference to suppliers because of pressure from management: “He gives so much for our school carnival.” • Allowing personality to enter into purchasing decisions • “I just love the salesman, he has better service”. What service? • “He goes to my church.” “ He has a student in our school.” • Giving preference to suppliers based on long-term business relationships or political connections: “ They are the ONLY one.” • Allowing anyone involved in manufacturing or selling the product to help with writing bid specifications

23. Conflicts of Interest • Conflict of interest is any action that allows a person to benefit at the expense of public interest or their employer • Excuse yourself if involved in the conflict of interest • Do not just hope no one finds out • Check district requirements for signing conflict of interest statement

24. Confidentiality • Providing confidential information to any person or entity that was not designated to be privy to that information is unethical. • Pricing of bids may not be made public until after the award process. • Bread man says: “I’ll meet or beat your best bid.”

25. Procurement Plan2 CFR 200.318(a) • What is a procurement policy? A procurement policy is a written statement that assures all purchases made with CNP Federal funds are handled fairly and in a manner that encourages full and open competition. • What is a procurement plan? • What will be done, who will do it, and how it will be done. • Code of Conduct • Conflict of Interest

26. Procurement Procedures

27. Procurement and Communication • Procurement is a complicated process that requires communication, unity, and dedication from all entities in the supply chain. • Internal Communication: everyone involved must know the policies and be accountable to their supervisor and board • Superintendent • Business Manager • Food Service Director (FSD) • Cooks in EVERY site (some districts have 2 sites that order from different distributors) • We see cooks ordering, business manager pays with no questions asked, superintendent thinks in the co-op, no one else knows; or FSD orders, cook receives wrong item/quantity, neither realizes mistake, everyone is mad

28. Itmakes sense that before purchasing for programs… An SFA must plan and evaluate: • Food service operations • Food service needs

29. 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

30. School Nutrition Supply Chain • SFA staff • State agency • Distributor • Broker • Manufacturer • USDA

31. Stock Keeping Units (SKUs) • A unique identifier for each unit of product • Often the product code number • Too many SKUs equate to too many different bid specifications • Each product needs a “slot” at the distributor’s warehouse • More slots means smaller slots • Each slot added increases the risk of running short • Do we really need 25 different chicken strips?

32. Reducing SKUs • Eliminating menu items that sell less than 50 servings • Using the same product for more than one menu item • Only allowing substitutions that have been approved by the person responsible for purchasing • Consolidating with other schools to pare down the list of acceptable items.

33. Menu • The driving force that begins the procurement process • Determines how much you spend • Determines what ends up in storage • Please don’t age your food before serving • Please do not order pre-cooked taco meat if you have free ground beef in the freezer • Must meet all federal guidelines and be appealing to the customer • Cycle menus make it easier to write menus and bids and to order

34. Receiving Food • Ensuring food products received are the food products ordered • provide a copy of the order to the person receiving the delivery, • check the products delivered against the products ordered, • communicate to the delivery person and the appropriate SFA staff member product shortages and quality concerns.

35. Procurement Methods > < Simplified Acquisition Threshold Federal Small Purchase Threshold = $150,000 “Informal” “Formal” Micro-Purchases Small Purchases Sealed Bids (IFBs) or Competitive Proposals (RFPs) * Requires public advertising Distribute equitably among qualified suppliers Requires price quotes from at least 3 bidders

36. Selecting the Proper Procurement Method • Micro-purchasing • Informal • Formal Bid • Competitive Negotiations • Sole Source

37. Procurement Regulations and Where to Find Them CONGRESS OMB USDA/FNS State SFA

38. 2 CFR • Streamlines guidance for federal awards to ease administrative burden • Supersedes and streamlines requirements contained in OMB Circulars A-21, A-50, A-87, A-89, A-102, A-110, A-122 and A-133 by consolidating the requirements of these eight documents into one. • Eliminates duplicate and conflicting guidance between old circulars

39. 2 CFR Part 200.317-.326 • Procurement Standards are found in 2 CFR Part 200.317-.326 • To be used by program operators for program purposes to provide reasonable assurance that the best buy is obtained • Failure to conduct proper procurements may lead to unreasonable costs

40. Informal Purchasing:Micro and Small

41. Micro Purchases • Equitably Distributed among qualified suppliers • No quotes required • Price must be reasonable Threshold: Aggregate transaction does not exceed $3,500

42. Small Purchases • Obtain quotes (may be email, catalogs, website, telephone, oral) • Documentation is required • More than one source Threshold: $3,500-$25,000

43. Small Purchase Method • Use when the estimated amount of your purchase falls below the small purchase threshold. Small purchases require that schools: • Develop written specifications; • Acquire quotes from at least three responsible and responsive vendors; and • Document all quotes.

44. Small Purchase Method (cont.) • Award to responsive and responsible bidder with lowest price • Responsive means that the vendor submits a bid that conforms to all specifications and terms of the solicitation. • Responsible means that the vendor is capable of performing successfully under the terms of the contract. • Document all procedures

45. Small Purchase Procedures

46. Solicitations for Small Purchases

47. Small Purchase Method Specifications • Include specifications for: • Food: grade, weight, quality, packaging, nutrition standards, delivery requirement, Buy American, etc. • Supplies: size, quality, packaging, etc. • Equipment: utility and space requirements, quality and features required, installation requirements, if applicable • Services: identify scope of services, certifications/licenses

48. Other Specification Requirements • Buy American - must be included in all product specifications, solicitations, purchase orders, and any other procurement documents. • Small purchases may include geographic preference for unprocessed agricultural products, and • If included, must be stated in the solicitation, and • Include the evaluation criteria and scoring to be used. • Local Sources for Purchasing Products

49. “3 Quotes and a Buy” • Develop product requirements and specifications. • Identify and contact at least 3 sources eligible, able, and willing to provide products. • Obtain 3 quotes. (document) • Evaluate to determine the responsible and responsive source with the lowest price. • Award the purchase and document.