Child Nutrition and Food Distribution Programs Kirsten Baesler State Superintendent What is Procurement The act of obtaining of goods or services in exchange for money or value Benefits of Proper Procurement ID: 739814
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Slide1
Procurement: Part 1
Deb Egeland
Child Nutrition and Food Distribution Programs
Kirsten Baesler, State SuperintendentSlide2
What is Procurement?
The act of obtaining of goods or services in exchange for money or valueSlide3
Benefits of Proper Procurement
Save timeSave moneyReceive the right productReceive the freshest productLeaves a paper trail
3Slide4
Why is Procurement Important?
USDA Requirement
Good Money
Management
Serve the best product possible
4Slide5
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.
5Slide6
WHY A TRAINING ON PROCUREMENT?
Always has been a requirement of program regulations7CFR 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)
6Slide7
WHY A TRAINING ON PROCUREMENT?
Federal grant management rules7 CFR parts 3016, 3019 and 3052Cost principles2 CFR 220 (A-21)2 CFR 225 (A-87)
2 CFR 230 (A-122)
New rules
2 CFR 200
7Slide8
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%.
8Slide9
Procurement – What You Need to Know
Understand goods, products, services neededPotential suppliers of goods, products, servicesThe best price
Which method of procurement to use
Document the steps involved
9Slide10
Procurement: A Multi-Step Process
Procurement procedures
ForecastingSelecting the proper procurement method
Developing a solicitation
Advertising the solicitation
Evaluating proposals/offers
Awarding the Contract
Managing the Contract Slide11
Where Should We Start?
We need to understand:
That competition is the basis for procurement rules and embraces the concept of competitionContract Administration is the umbrella that covers the many steps in the procurement process
The framework and players in the procurement arenaSlide12
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.
12Slide13
Bid Evaluation Factors: Get
What you Want
Student preference/taste testsPrice (required)Menu adaptabilityPast recall experience/ Quality control testingOrdering requirements
Packaging
Payment policies
Whatever the district
wants, write it in for
all
bidders
13Slide14
Principles
of Good Procurement
Free and open competition Fairness and integrity
Responsive and responsible
vendors
Accountable and transparentSlide15
Accountable and Transparent
The effective use of School Nutrition FundsState and local officials who administer these programs are accountable to tax payers
Clear Forthright
Out in the open Slide16
Competition
Secures the best price for the best quality product or serviceAllows companies to differentiate
PricesServicesInnovationSlide17
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 businessSlide18
Embracing Competition
If the “playing field” is level, vendor participation is encouraged
The cost of products and services will be lower in priceBetter quality products and services resultSlide19
Ethics
Important to fair competitionMoral standards used to guide decisions in personal and professional
livesPractices that promote free and open competition
Unethical practices can damage reputations of the person and compSlide20
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?
20Slide21
Code Of ConductSlide22
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 Slide23
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 interestDo not just hope no one finds out
Check
district requirements for signing conflict of interest statementSlide24
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.”Slide25
Procurement Plan
2 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
25Slide26
Procurement Procedures
Review of LEA/SFA Documented Procurement Procedures & Procurement Practices
3. Does the SFA/LEA's have documented Procurement Procedures? [2 CFR 318(a)]
4. If yes, do the SFA's documented procurement procedures:
a. Include State, local and Federal laws and regulations? [2 CFR 200.318(a)/7 CFR 3016.36(b)(1)]
b. Prohibit the acquisition of unnecessary or duplicative items? [2 CFR 200.318(d)/7 CFR 3016.36(b)(4)]
5. Does the SFA/LEA perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications? [2 CFR 200.323(a)]
6. Does the SFA have written procedures for procurement transactions that ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured?
7. If YES to Q6, does the description contain features which unduly restrict competition?
8. Does the SFA/LEA take steps to
to
assure that small, minority and women's businesses enterprises and labor surplus firms are used when possible? [2 CFR 200.321] Slide27
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 boardSuperintendentBusiness ManagerFood 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 Slide28
It makes sense that before purchasing for programs…
An SFA must
plan and evaluate:Food service operations
Food service needsSlide29
Forecasting: Evaluate Operations
Evaluate the current and future food service operation to determine needs
Self-Op/Central Kitchen/FSMCStorage capacityProcessing abilitiesResources- financial, staff, other
Food safety practices
Prior year menus
InventorySlide30
School Nutrition Supply Chain
SFA staffState agency
DistributorBroker
Manufacturer
USDA Slide31
Stock Keeping Units (SKUs)
A unique identifier for each unit of productOften 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?Slide32
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.Slide33
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 orderSlide34
Receiving
Food
Ensuring food products received are the food products orderedprovide 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. Slide35
Procurement Methods
Simplified Acquisition Threshold
“Informal”
“Formal”
Micro-Purchases
Small Purchases
Sealed Bids (IFBs) or Competitive Proposals (RFPs)
*
Requires public advertising
Requires price quotes from at least 3 bidders
Distribute
equitably among qualified suppliers
Federal Small Purchase Threshold = $150,000
<
>Slide36
Selecting the Proper Procurement Method
Micro-purchasing
Informal Formal BidCompetitive Negotiations
Sole Source Slide37
Procurement Regulations and Where to Find Them
CONGRESS
OMB
USDA/FNS
State
SFASlide38
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 circularsSlide39
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 costsSlide40
Informal Purchasing:
Micro and SmallSlide41
Micro Purchases
Equitably Distributed among qualified suppliers
No quotes required Price must be reasonable
Threshold:
Aggregate transaction does not exceed $3,500Slide42
Small Purchases
Obtain quotes (may be email, catalogs, website, telephone, oral)
Documentation is requiredMore than one source
Threshold:
$
3,500-
$25,000 Slide43
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; andDocument all quotes. Slide44
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 proceduresSlide45
Small Purchase ProceduresSlide46
Solicitations for Small PurchasesSlide47
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/licensesSlide48
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 ProductsSlide49
“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. Slide50
Supplier Name
:
HANDOUT:
INFORMAL
PROCUREMENT LOG
EVALUATION MATRIX
Items to be Purchased:
Delivery Frequency : __________
Bid will be honored for: ________ (number of day(s)/week(s)/month(s)) (school will state time period)
Quantity estimated to be purchased
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
1. Product name & specification:
2. Product name & specification:
3. Product name & specification:
4. Product name & specification:
5. Product name & specification:
6. Product name & specification:
Total:
$
$
$
*Bidder Selected (BS)
*Bidder Selected (BS); school can award all items to one bidder (lowest total price) or award purchase on a line item basis (lowest line item price). School need to tell the bidders which option they will use for awarding the purchase when they are asking for pricing. Schools can state that either option may be used by the school to award the purchase.
Method of contact: Email/Fax/Mail/In person/Phone
Name of person quoting pricing:
Date contacted:
Additional Notes:
Signature of person completing this form:
Date:
Slide51
Supplier Name:
Supplier A: Bob’s Company
Supplier B: Mary’s Company
Supplier C: Pat’s Company
Items to be Purchased:
Product specifications
Delivery Frequency:
one time delivery
Bid will be honored for:
two weeks
(school will state time period)
Quantity estimated to be purchased
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
Unit Price
Extended Price (Quantity x Unit Price)
*BS
(
)
Applesauce 6/10 cans
30
15.75
472.50
16.50
495.00
15.00
450.00
Pineapple 6/10 cans
10
16.25
162.50
17.50
175.00
18.00
180.00
Cranberry Sauce 6/10 cans
5
25.25
126.25
21.75
108.75
23.50
117.50
Peaches, Freestone, (Halves) 6/10 cans
30
22.25
667.50
21.50
645.00
22.75
682.50
Total:
$1433.25
$1423.75
$1430.00
*Bidder Selected (BS)
*Bidder Selected (BS); school can award all items to one bidder (lowest total price) or award purchase on a line item basis (lowest line item price). School need to tell the bidders which option they will use for awarding the purchase when they are asking for pricing. Schools can state that either option may be used by the school to award the purchase.
Method of contact: Phone, Fax, Email or In Person
Fax
Phone
In Person
Name of person providing bid:
Bob
Mary
Pat
Date contacted:
July 11, 2012; Faxed in bid - Bid sheets attached
July 10, 2012; Price given per phone. - Confirmed in writing and attached
July 13, 2012; Visited store and obtained prices. - Price sheet attached
Additional Notes
:
Bob said their fresh fruit and vegetables are more competitively priced than canned goods.
Best overall pricing; Mary stated that they will have a clearance special going on in October.
Pat said that their delivery costs have gone up recently but that in November they will have a new distributor and pricing.
Signature of person completing this form:
Date:Slide52
Bid Evaluation Procedures Include
Determine responsible and responsive (able to perform, offers meet product/service requested)Evaluate price
Document Slide53
What to do when only one or two bids are received
Examine your product requirements to ensure they are not unnecessarily restrictive.
Use additional methods to locate vendors/suppliers, e.g., email known vendors, place advertisement in newspaper, follow-up with calls, etc. Examine any other possible reasons for the limited reply.If only one or two bids are received after the efforts discussed above, the purchase may be made if the cost is reasonable.
Document
the bid process, including efforts made to secure additional bids, etc. Slide54
Formal Procurement ProceduresSlide55
Procurement Methods
HANDOUT: FORMAL METHODS
Sealed
Bids (
IFB)
Competitive Proposals (RFP)
Non-competitive Proposals
Regulations
200. 320(c)(1)(i-iii)
200. 320(c)(2)(i-v)
200. 320(d)(
1)
200.320(f)(1)
Procedures In a nutshell
Technical specifications
Advertise bid
Public bid opening
Award on price alone – firm fixed price
Solicitation includes evaluation criteria. Award based on score with significant weight on price and not price alone
>Item available only from a single source >public exigency >competition deemed inadequate
State Agency oversight
Assurance of advertising, bid opening and resulting in fixed price contract (required provisions relative 7
CFR
210 and 7 CFR 200)
Appendix 2 part 200
Assurance of advertising, SA approval prior to execution of contract, may result in fixed price or cost
reimbursable
> SA must assure SFA receives discounts, rebates and credits in cost reimbursable contracts
Assure adherence to 200.320(f)(1) Slide56
Invitation for Bid (IFB/Sealed Bid)Used for purchases/services that are identifiable.
Ideal for food, equipment, supplies, etc.Competitive Proposals (RFP)Used for purchases/services that are a more flexible, harder to set specifications
Ideal for repair services, leases, and softwareTwo Types of Formal ProcurementSlide57
Sealed Bids
Solicitation: complete, adequate, and realistic specification/description
Publicly advertised Competition: Level playing field
Public bid opening
Fixed Price ONLY
Threshold:
(
Exceeds $150,000, or most restrictive threshold)Slide58
Competitive Proposals
Used when sealed bid not appropriate
Publicized with evaluation factors and relative importanceContract award to responsible firm most advantageous with
price as primary
Fixed price or Cost Reimbursable
Threshold:
(Exceeds $150,000, or most restrictive threshold)Slide59
Formal ProcurementSlide60
When is an IFB used?
Competitive Sealed Bidding (i.e. , IFB)
A complete, adequate, and realistic specification or purchase description is available;Two or more responsible bidders are willing and able to compete effectively for the business
The procurement lends itself to a
firm fixed price contract
awarded to the most responsible and responsive bidder made principally on the basis of price.Slide61
What are Competitive Proposals (i.e., RFPs)?
7 CFR 200.320(d)
The technique of competitive proposals is conducted
with more than one source submitting an offer, and either a fixed price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is
used, requirements apply.Slide62
Included in an RFPInclude all required language (terms, conditions, required provisions, minimum requirements)
Evaluation Criteria (written method for conducting technical evaluation)RFP MUST be awarded based on firm fixed price or as a cost-reimbursable contractContracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered
PublicizedPublish Request for Proposal (RFP)Vendor questions/responses/negotiations / pre-bid meetings/ addendums Pre-award presentationsPerform Technical Evaluation of ProposalsThis may include Geographic Preference
No public opening
Elements of an RFP solicitationSlide63
Fixed Price Contract Variances
Firm Fixed Price – no adjustmentsFixed Price with Economic Price AdjustmentFixed Price with Prospective Price RedeterminationSlide64
Evaluation
Evaluating ResponsesFixed price contracts: Evaluation is for lowest responsive and responsible along no other dimension than price
Cost reimbursableEvaluation – document review of best technical response according to evaluation criteria and scoring as stated in solicitationNegotiation with top respondersReview of price – PRIMARY CONSIDERATION in scoring Slide65
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 or received by the contractor or any assignee under the contract to the extent those credits are allocable to the allowable portion of the costs billed to the school food authority?
The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or that the contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification
If Cost-ReimbursableSlide66
The contractor must identify the amount of each discount, rebate and other applicable credit on bills and invoices presented to the school food authority for payment and individually identify the amount as a discount, rebate, or in the case of other applicable credits, the nature of the credit.
The contractor must identify the method by which it will report discounts, rebates and other applicable credits allocable to the contract that are not reported prior to conclusion of the contract.The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department.
If Cost-ReimbursableSlide67
Evaluate Responses
Evaluate all responses received The solicitation should have identified all evaluation criteria and their relative importance (scoring)
E.g., points assigned to each criteriaNote: An IFB doesn’t generally include points, rather a SFA determines the most responsive bidder based on criteria that is more “Pass/Fail in nature. The solicitation and contract award is made to the lowest price)
Transparency – NO SURPRISESSlide68
Award and Execute Contract
Once evaluated, a contract may be awarded and the contract executed.
Remember, contracts for FSMCs require prior approval by the State agencyAny pre-issuance requirements by the State agency also apply. Does your State agency have pre-issuance requirements in place?
Any changes to a State agency prototype must also have written State agency approval.Slide69
One type of noncompetitive proposal
Occurs only when the goods or services are available from only one manufacturer through only one distributor or supplier
Describes a condition of the procurement environmentIn a true sole source situation, conducting a traditional solicitation is a meaningless act, because the element of competition will not
exist
Sole Source Definition
FSMC Guidance for SFAs, p. 8Slide70
200.320(f) - (f) Procurement by noncompetitive proposals. Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply:
(1) The item is available only from a single source;(2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;(3) The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or
(4) After solicitation of a number of sources, competition is determined inadequate.Regulation
2 CFR 200.320(f)Slide71
Proposals must include both price and terms using the same procedures that would be followed for competitive
proposalsSFAs must first obtain State agency approval
SFAs must always follow State and local regulations!Practical Information
FSMC Guidance for SFAs, p. 7-8Slide72
Managing Contracts
2 CFR Part 200.318(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase
ordersSlide73
Understand the contractTerms
ConditionsProductsPrices (price changes allowed and when)Buy AmericanBilling process
Steps to terminateCost monitoring requirementsExtension (allowable if in IFB/RFP)What changes are allowed, if any?Price AdjustmentsTermination process
Contract Extensions
Managing ContractsSlide74
Did the vendor provide the products specified in the contract in good condition?Is the vendor and the SFA following the protocol outlined in the contract?
Are invoices matching the prices indicated in the contract?Is the vendor adhering to the Buy American requirements?Are geographic preference requirements being adhered to?
Products and Buy AmericanSlide75
How often
is the LEA
monitoring the price?What is the vendor required to provide to justify price?Is the vendor following the procedure outlined in the contract?
Is the vendor transparent about costs?
Were all discounts rebates and credits indicated on invoices and according to contracts requirements?
Only allowable expenses included?
For Cost Reimbursable ContractsSlide76
Were
there any
material changes made to the contract?Did the LEA/SFA reissue the solicitation in a timely manner for other possible offerors if a material change was made?
Material ChangesSlide77
Question #1
What determines when to use procedures below the small purchase threshold, or above the simplified acquisition threshold? We commonly refer to these as “informal” or “formal” procedures.
A. The size of my school district. B. The items I’m procuring (fresh produce vs. canned or frozen food). C. The services, supplies, or other property being
procured total cost
D. Personal preference in process.Slide78
Question #2
What are the allowable processes for purchases above the micro purchase threshold?
Small purchase Procedures.Sealed Bids (IFB)Competitive Proposals (RFP)
Non-competitive Proposals
All the above
B
and
C
Developing
a solicitation while wearing a tuxedo or formal gown.Slide79
Question #3
Must a non-Federal entity follow written procedures for formal procurement transaction?Yes
No Slide80
Questions?
CNFD 701-328-2294Tool Free 1-888-338-3663
Deb Egeland degeland@nd.gov 701-328-3718Linda Schloer lkschloer@nd.gov
701-328-4565