Procurement 101 Washington State Nutrition Association Conference July 30, 2012 Donna Parsons MS, RD Director, Child Nutrition Services Jennifer Mitchell.

Procurement 101

Washington State Nutrition Association ConferenceJuly 30, 2012

Donna Parsons MS, RD Director, Child Nutrition Services

Jennifer Mitchell MS, RDFresh Fruit & Vegetable Program Specialist

Procurement 101 Objectives

• Recognizing the need for financial management.

• Being good stewards - understanding the pass down requirements.

• Procurement Basics:• Understanding free and open competition• Definitions – laying the groundwork for the future• The bottom line

Financial Management

What is it…and why waste time thinking about it?

What is Financial Management?

• It is the management of organizational finances to achieve its financial objectives.

• Key elements include:– Financial Planning: Managing ones needs.– Financial Control: What is being done to ensure

funds are being used properly?– Financial Decisions: Determining how funds are

spent.

Financial Management Importance

• Managing the financial resources of federal school meal programs is critical to the success of maintaining quality standards and ensuring nutritious meals are served to children.

• Dollars spent by the federal government, states, and paying students added together represent a significant level of public funding.

…we are stewards of taxpayers’ money The federal government has a fundamental

responsibility to be effective stewards of the taxpayers' money. We must be responsible with money that comes in to the government, money that is spent, and money that is used in running the government itself. Decision makers and the public must have confidence in financial management in order to make informed decisions about managing government programs and implementing policy.

http://www.whitehouse.gov/omb/financial_default/

Congress

Laws establishing School Nutrition ProgramsLaws establishing financial requirements

USDA

Develop and apply 7 CFR Parts 3016 & 3019Develop and apply program regulations 7 CFR Parts 210, 215, and 220Develop and apply guidance and instructions

OMB

Issue OMB CircularsOMB A-133Circulars A-102, A-110, A-87, A-122, and A-133

State Agencies

Comply with 7 CFR Parts 3016 and 3019Comply with USDA program regulations 7 CFR Parts 210, 215, and 220Comply with USDA guidelines and instructionsComply with state law, regulations, and policies that are not in conflict with federal requirements

School Food Authorities (aka LEAs)Comply with 7 CFR Parts 3016 and 3019Comply with USDA program regulations 7 CFR Parts 210, 215, and 220Comply with USDA guidelines and instructionsComply with state law, regulations, and policies that are not in conflict with federal requirementsComply with local law, regulations, and policies that are not in conflict with federal requirements

Poor financial management…

Who?

• All entities using federal funds must follow the federal procurement process.

• Proper procedures, no matter how small the cost, must be followed by anyone using federal funds.

What?• Procurement is the purchasing of goods and

services.• It is a process, not an event, which involves:– Distinct phases of planning;– Drafting specifications;– Advertising the procurement;– Awarding the contract, and;– Managing the contract.

Why?• Going through the procurement process is to

ensure that the LEA receives goods and services:

• from the most responsible vendor;• from the most responsive bid;• at the lowest possible price.

A Good Procurement

• A good procurement consists of four principles:– Free and open competition;– Fairness and integrity;– Responsive and responsible contractors, and;– Transparency.

The Importance of Competition

• Accountability to taxpayers;• More and/or higher-quality goods

and services;• Protection of businesses and the health of the

economy, and;• The cost of good and services may be the only

area the LEA can directly influence its costs.

• Program Regulations for Procurement:–NSLP: 7 CFR 210.21– SBP: 7 CFR 220.16– SFSP: 7 CFR 225.17– CACFP: 7 CFR 226.22

• Uniform Administrative Requirements for Procurement:– State/local governments: 7 CFR 3016.36– Non-profits: 7 CFR 3019.44

Where?

7 CFR Part 210

LEAs must:

•Establish and operate a nonprofit school food service account.

•Ensure all revenue from all food service operations conducted by the LEA is retained and used only for the operation or improvement of the nonprofit school nutrition program.

7 CFR 3016.36(b)(3)• LEAs must have a written code of procurement

standards or conduct:– Guidelines/limitations for employee actions.– Be clear about need to avoid real and perceived

conflicts of interest.– Foster competition in all actions.– Require rationale and documentation for methods

used.– Establish written selection procedures for all methods

used.

Buy American Provision• National School Lunch Act requires the purchase of

domestic agricultural commodities and domestic food products.

• LEAs must ensure end products received from processors contain only domestic goods (i.e. flour used to make chicken nuggets).

• LEAs should include a Buy American clause in all product specifications, solicitations, purchase orders, and any other procurement documents so that

contractors are aware of this requirement.

Geographic Preference

• The 2008 Farm Bill amended the National School Lunch Act to include geo preferences.

• Applying a geo preference is prohibited in federal procurement except where applicable federal laws expressly permit their use.

• Geo preferences are not required, it is an option that must be stated in the solicitation.

When?

Anytime the LEA decides to purchase, it must go through the procurement process.

– There is no bottom threshold amount.

Procurement Planning Steps

Procurement Methods

• Similarities– Use of a solicitation– Competitive– Not based on basis of cost plus percentage of cost

or cost plus percentage of interest

• Differences– Informal method typically yields fewer bids– Formal method is more rigorous and prescriptive

Procurement Methods

• Key elements to determine formal or informal:– The estimated value of the contract.• Requires knowledge of the most restrictive small purchase

threshold.• The value includes purchased and donated USDA Foods.• The small purchase threshold applies to an event, not to

cumulative purchases over the year.

– The length of time the vendor will guarantee price(s).

Splitting the Procurement

LEAs may not intentionally split purchases to fall below the small purchase threshold and to avoid the formal procurement method.

Informal Procurement • Does not exceed the small purchase

threshold:• USDA = <$100,000• Washington State = <$75,000

• Requires a solicitation for quotes• Should be written prior to request for quotes• A minimum of 3 quotes

• Requires detailed documentation

Informal Procurements

Four Solicitation Phases •Write down the specifications•Identify >2 responsive quote sources•Obtain written confirmation of quotes•Make award determination

Formal Procurement • Can be used with any procurement but is

required with purchases of:• USDA = >$100,000• Washington State = >$75,000

• Requires a solicitation for bids • Requires detailed documentation• Two types of formal procurements• Competitive sealed bids• Competitive non-sealed bids

Competitive Sealed Bids

• LEAs advertise an Invitation to Bid (IFB)• Results only in a fixed price contract– Firm fixed price– Fixed price with economic priced adjustment– Fixed price with prospective price redetermination

• Requires no negotiation• Awarded solely on basis of price

Competitive Sealed Bid Examples• Firm fixed price for canned vegetables:– Specs are easy to develop– Forecast amounts based on past performance– Award to the lowest responsive bidder

• Fixed price w/prospective price redetermination for milk products:– Same as firm fixed price– Advance price for skim milk & butterfat is used

monthly to adjust price up or down based on federal milk market order.

Competitive Non-Sealed Bids

• LEAs advertise an Request for Proposals (RFP)• Results in a fixed price contract.• Used when price is one of several factors in

determining the award. – RFPs are not sealed as the LEA and vendors may

need to negotiate contract factors.– Award is based ultimately on price.

Some final things to consider….• USDA Foods• Procuring a processor? • Be clear about distribution agreements• Address whether bonus USDA Foods may require

processing• Address possible substitutions whether involving

commercial or USDA Foods

USDA Foods• Schools participating in NSLP and SBP receive USDA

Foods, called “entitlement” foods• Schools may choose to process USDA Foods– Food safety concerns (most items come fully cooked)– Difficult to use food items in raw form– More varied higher quality meals– Reduction in prep time and waste– Portion control– Product consistency (i.e., getting same chicken nugget

each time)– Cost (labor cost associated with processing)

Resource

Tip: New FD Policy Memo on Soliciting Bids from Commercial Distributors for End Products (FD-119)

(http://www.fns.usda.gov/fdd/policymemo/pmfd119_NSLP_PROC-SolicitingBids.pdf)

Resource

Tip: FD Policy Memo on Further Clarification in Crediting for, and Use of, Donated Foods in Contracts with Food Service Management Companies (FD-110)

(http://www.fns.usda.gov/cnd/governance/Policy-Memos/2011/SP05%20-2011_os.pdf)

Questions?