Buy Right with the NEW Buy Right with the NEW RegulationsRegulations

DefinitionDefinitionA bid is a contractual procurement

agreement between a school foodservice and a vendor for:

Specified TimeSpecified PriceSpecified Quantity

Purchasing decisions must Purchasing decisions must be based on be based on

the nutritional needs of the nutritional needs of children.children.

• Purchasing supports the primary goal of the Child Nutrition Programs, which is “to protect the health and well being of the nation's children,” As stated in the National School Lunch Act of 1946

Why is Purchasing Why is Purchasing Important?Important?

• Ensure quality meals that meet student preference for best possible price

• Food and supply costs under control of school managers/directors

• Shrinking resources

Why Bid?Why Bid?

• Preferred product• Legal Issues• Lowest Price• Keep Distributors

Honest• District Requirements

Procurement RegulationsProcurement Regulations

• NSLP – Title 7 of Code of Federal Regulations (CFR) Part 210.21

• Federal Procurement 7 CFR– Part 3016– Part 3019

fns.dpi.wi.gov/fns_procurement

Methods of Procurement

3 Most Common Types of Purchasing

– Bid

– Invitation for Bid (IFB)

– Request for Proposal (RFP)

BidBidSelection (Contract Award) of

Product or Service is Based On

– Price Only

Invitation for BidInvitation for BidSelection (Contract Award) of Product or

Service is Based On

– Price Only

– Minimum Specification

Request for ProposalSelection (Contract Award) of Product or

Service is Based On

– Price Only– Minimum Specification– Weighted Criteria

Weighted Criteria

• Assigned Points Reflect Significance of Item or Goal

• Price Must be the Most Significant

Weighted Criteria

• Point spread between the best proposal and the second best should be mostly based on the importance of the item or goal

• Matrix used to sum up points and award contract

Informal Method of Procurement

Definition:

• Total Value of the Contract for Goods and Services is under $ 100,000

• Solicitation of Companies (minimum 3) Known to be Doing the Kind of Business Needed

Formal Method of Procurement

Definition

• Must be Written • Total Value of the Contract for Goods and Services

is over $ 100,000• Mailed to all Companies (minimum 3) Know to be

Doing the Kind of Business Needed• Intent to Purchase Must be Published a Minimum of

14 Days Prior to the Due Date in the Legal Notice Section of a General Circulation Newspaper

• Opened Publicly

Bid Protocol at Opening

• Offers are taken under advisement • 2 – 3 people present• Only bidders may view other bids

before public record• Public record after

awarded and purchased

Absolutely NO feedback until evaluation is completed –then it goes to the bid department

Getting StartedGetting Started

Identify:• Goods and/or Services

• Quantities

• Needs and/or Requirements

• Separate “Got to Have” from “Nice to Have”

Procurement

• Good Administration

• Ethics in Purchasing

• Free and Open Competition

• Clear and Accurate Description

• Procedures

Good Administration• Award bids or proposals to only

responsible contractors

• Ensure that pre-qualified lists of person, firms or products are current

• Adequate number of qualified sources

Good AdministrationDo you have written selection procedures for

procurement transactions that ensure that all bids or solicitations:

1. Use “brand name or equal” or multiple brand names without “equal” when it is impractical to clearly describe technical requirements of the product?

2. Identify all requirements which the bidders must meet and all other factors that will be used in evaluation bids or proposals?

Ethics in PurchasingEthics in Purchasing

• Questions related to ethics do not always have clear answers. A good general rule is:

“If you question an action, then you should not proceed.”

Purchasing professionals agree Purchasing professionals agree that unethical behavior is:that unethical behavior is:

• Providing one supplier’s cost information to another supplier before supplier selection.

• Showing preference to suppliers because of pressure from administration or boards.

• Accepting gifts or cash from a supplier.

Additional ethical issues:Additional ethical issues:

• Allowing personality to enter into purchasing decisions

• Obtaining proprietary information from one supplier and sharing it with their competitor

• Accepting free trips and entertainment.

Promotion of Free Promotion of Free and Open Competitionand Open Competition

• Determine Companies Doing The Type Of Business Desired

• Contact All Known Companies

Situations Considered to be Situations Considered to be Restrictive of Competition,Restrictive of Competition,

but are not limited to:but are not limited to:

• Placing unreasonable requirements on firms to qualify to do business

• Requiring unnecessary experience and excessive bonding

Situations Considered to be Situations Considered to be Restrictive of Competition,Restrictive of Competition,

but are not limited to:but are not limited to:• Non-competitive awards to consultants hired on

retainer basis• Organizational conflicts of interest• Specifying only a “brand name” product instead of

allowing “an equal” product to be offered and including the specifications

• Any arbitrary action in the procurement process

Promotion of Free Promotion of Free and Open Competitionand Open Competition

• Geographic preference, or “local preference” NOT permitted See 7 CFR Part 3016.36 (c)(2)

• Use domestic products to the maximum extent possible

• Follow the most restrictive of local, state or Federal law, rules

Clear andClear andAccurate DescriptionsAccurate Descriptions

• Product Specifications

• Problems with specifications

• Developing descriptions

Reasons to have SpecificationsReasons to have Specifications

• Clarifies what the food production unit wants

• Informs the distributor and manufacturer what the customer wants

• Advises the receiving person what should be delivered

Product SpecificationProduct Specification• Product name• Federal grade• Size information: container and product• Bid unit• Quality indicators• Packaging requirements• Test or inspection procedures• One source of specs

http://www.ams.usda.gov

Product SpecificationProduct Specification

• Evaluate product quality before bid opening – brand pre-approval

• 10- 30 % price difference = quality difference

• Direct relationship between the length of time of prices held and the price paid

Problems with SpecificationsProblems with Specifications

• Brand prejudice – no “or equal”• Unreasonable requirements not related to

quality but increase price: i.e. delivery• Competition limited due to too tight specs• Quality level specified difficult to obtain

Problems with SpecificationsProblems with Specifications

Cont’dCont’d

• Not updating specs• Purchasing and receiving staff not trained

to use specs• Vendor, after gets bid: “low balls” or

trades up to more profitable item• Inequality among bidders if specs too

loose• If error: stuck for the bid period

Developing Descriptions

• One Ingredient or

• One Major Ingredient: Rely on Standards of Identity and Grade standards; state this in bid and don’t repeat info. Determine grade needed and state “to be packed to USDA grade __ standards

Developing DescriptionsMultiple Ingredient (Highly processed):

A system for consistent results might includeRegulations:

research re: manufacturer of productIndustry Standards:

check with professional organizations, and

product and bid specialistsQuality Indicators:

study and evaluate those not covered by regulations

Developing Descriptions1. Student Taste Test: to narrow down broad

categories

2. Write Draft Description

3. Use draft to create product comparison work sheet with products currently available: Extra requirements not currently available increase cost

4. Modify Description as needed

Developing Descriptions

5. Review by manufacturers’ technical and bid specialists

6. Revise as needed

7. Student taste test for approved brand acceptance

Procedures

Records to Keep

• Documents issued to solicit price proposals

• Responses from vendors

• Signed award documents

• Reason for vendor selection

Must maintain written selection procedures that:

• Give clear, accurate requirements for the product but do not unduly restrict competition

• Identify all requirements contractor must fulfill or meet

• Identify other issues used to evaluate bids proposals

DocumentationSchools and Districts must keep all records

regarding selection of a bid to proposal to show:

• Rationale for method of procurement

• Selection of contract type

• Vendor selection or rejection

• Basis for contract price

Time Line Considerations(working backward from delivery)

• Bid award to first delivery: Allow 2 -3 wks between vendor notification and 1st delivery; inform receivers

• Bid opening: take all bids “under advisement”, usually require board approval,

• Bid issue to opening: at least 3 wks; consider off season; consider copies of significant pages to brokers and mfrs

Time Line Considerations (working backward from delivery)

• Final Conference to Prices: Depends on accuracy of earlier steps done; ~ 2 weeks

• Screening to Final Draft: Depends on number of changes to the product list and brand approvals

• Screening: 1st time could take a year for verifying, updating info; 3 mos. In later years

Rule Changesfor Contracting with FSMC

– Allowable costs must be net of discounts, rebates, credits.

– Only allowable costs

can be charged to

nonprofit

food service account.

Rule Changesfor Contracting with FSMC

DPI to review contract terms of invitations for bids and/or

requests for proposals

before their issuance.

Rule Changesfor Contracting with FSMC

The SFA is also required to obtain: DPI’s approval of any changes or amendments before any contract or amendment to an existing FSMC contract is executed.

Rule Changesfor Contracting with FSMC

Two Prototype FSMC Contracts:

Fixed Cost

Cost plus a Fixed Fee