An Overview of Federal Regulations and Requirements for SFAs

What is procurement? Procurement is a multi-step process for obtaining equipment, services, materials or supplies for the lowest price. All goods and services purchased with child nutrition funds must be procured using federal regulations.

Preparing for Procurement In order for the procurement process to be successful, it is strongly advised that you familiarize yourself with the federal and state regulations prior to beginning the process.

Procurement Regulations for SFAs – Passing the Torch From ~  7 CFR 3015 – Uniform Federal Assistance Regulations  7 CFR 3016 – State/Local Governments  7 CFR 3019 – Non-Profits To ~  “Super Circular”  2 CFR 200 

What is the Super Circular?  The Office of Management and Budget (OMB) promised a 21 st century government that was more efficient, effective and transparent. Thus, the super circular was created.  Streamlined OMB circulars on administrative requirements, audit requirements and cost principles.  default/.

How does this affect SFAs? Micro purchases Written procurement procedures NYS General Municipal Law – requires advertising for purchases over $20,000 Written conflict-of-interest policies Contract Award & Maintenance Procurement Record Retention State Review

Procurement Standards There are five general standards: 1. Documented Policies 2. Necessary 3. Full & Open Competition 4. Conflict of Interest 5. Documentation of cost/price analysis and vendor selection

Five Methods of Procurement 1. Micro purchases 2. Small purchases 3. Sealed bids 4. Competitive proposals 5. Sole source

Procurement Method – Micro Purchases 1. Purchases less than $3, No competitive quotes required 3. Spread purchases out among qualified suppliers 4. Include in procurement plan

Procurement Method – Small Purchases 1. Quotes must be obtained from an adequate number of sources. 2. Obtain quotes from suppliers or public websites

Procurement Method – Sealed Bids 1. Purchases over $150, Publicly advertise and solicited from adequate suppliers 3. Lowest bid wins

Procurement Method – Competitive Proposals 1. Written policy for conducting technical evaluations of reviewing proposals and selecting the recipient. 2. Most advantageous bidder wins 3. Price and other factors

Procurement Method – Sole Source In order for a sole source purchase in any amount, one of the following conditions must be met: 1. The good/service is only available from a single source. 2. Only one source can provide the good/service during the timeframe required. 3. Written pre-approval from SED. 4. Competition is deemed inadequate, after solicitation attempts through one of the other methods.

Simplified Acquisition Threshold (§200.88) Also known as a “small purchase” Simplified Acquisition Threshold raised from $100,000 to $150,000 SFAs follow informal procedures to procure goods or services below the simplified acquisition threshold. Reduces administrative burden

“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. Evaluate to determine the responsible and responsive source with the lowest price. Award the purchase and document your procedures.

Other Specification Requirements Buy American – 7 CFR Part (d) a) National School Lunch Act requires the purchase of domestic agricultural commodities and domestic food products. b) A Buy American clause must be included in all product specifications, solicitations, purchase orders, and any other procurement documents. c) Refer to USDA FNS memos SP , SP , SP and SP

What to do when only one or two bids are received (informal purchase) Examine your product requirements to ensure they are not unnecessarily restrictive. Use additional methods to locate vendors/suppliers, e.g., 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.

Competition Killers Competitive Procedures must not: Place unreasonable requirements on firms Require unnecessary experience Give noncompetitive awards to consultants or vendors Have organizational conflicts of interest Specify only brand name products Make arbitrary decisions in the procurement process Write bid specifications that are too narrow and limit competition Allow potential contractors to write or otherwise influence bid specifications Provide insufficient time for vendors to submit bids Use a geographic preference or “local” in bid specs Arbitrarily divide purchases to fall below the small purchase threshold

Unnecessary or Duplicative Items The non-Federal entity's procedures must avoid acquisition of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach

Procurement Methods Simplified Purchase Threshold InformalFormal Micro-PurchasesSmall Purchases Sealed Bids (IFBs) & Competitive Proposals (RFPs) * Requires public advertising Requires price quotes from at least 3 bidders Distribute equitably among suppliers (Federal Threshold = $150,000 ) <>

Formal Procurement Process Select Method Develop and Publicize Solicitatio n Award and Execute Contract Manage Contract Receive and Evaluate Responses

Price/Cost Analysis 2 CFR Part Contract cost and price. (a) …perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals (forecasting).

What is Competitive Sealed Bidding (i.e. IFB)? 2 CFR (c) Bids that are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price

When is an IFB used? Competitive Sealed Bidding (i.e. IFB) A complete, adequate, and realistic specification or purchase description is available; Three 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.

What are some components of Competitive Sealed Bidding (i.e. IFB)? Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids, for all organizations, the invitation for bids must be publically advertised

What are some components of Competitive Sealed Bidding (i.e. IFB)? The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly

What is awarded? Competitive Sealed Bidding (i.e. IFB) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. In a firm, fixed-price contract, rebates discounts and credits do not have to be returned to the nonprofit food service account as the vendor factors this into the price they are willing to “fix” for the contract period; Any or all bids may be rejected if there is a sound documented reason.

What is Competitive Proposal (i.e. RFP)? 7 CFR (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.

What are Some Components of Competitive Proposal (i.e. RFP)? RFPs must be solicited from an adequate number of people. RFPs also must be publicized and identify all evaluation factors and their relative importance. Any responses to publicized RFPs must be considered to the maximum extent practical SFAs must have a written method for conducting technical evaluations of the proposals received and for selecting recipients Contracts must be awarded to the responsible vendor whose proposal is most advantageous to the program, with price and other factors considered

Additional Provisions when a Cost-Reimbursable Contract is to be Awarded (7 CFR Part (f)) 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

Cooperative or Group Purchasing Increases buying power to receive the best products at the lowest prices Must still conform to federal procurement regulations Piggybacking Requirements when using a group purchasing or buying organization Refer to USDA memo SP

Terms and Conditions & Provisions Federal Provisions that apply: Appendix II Contract Provisions for 2 CFR Part 200 (formerly from 7 CFR Part (i). These are the same as before so you know these as: Administrative, contractual, or legal remedies Termination clause Equal Employment Opportunity Executive Order Copeland Anti-Kickback” Davis-Bacon Contract Work Hours and Safety Standards Reporting 33

Terms and Conditions & Provisions More Federal Awarding agency requirements and regulations (this includes allowable cost provisions in 7 CFR Part (Buy American, allowable cost provisions in cost-reimbursable contracts Look at the books – Comptroller General of the United States, et.al. Clean Air and Water Act Debarment and Suspension Lobbying New: 2 CFR Part Procurement of recovered materials. For a non-Federal entity that is a state agency or agency of a political subdivision of a state and its contractors must comply with section 6002 of the Solid Waste Disposal Act…… 34

Terms and Conditions & Provisions State or Local Provisions: There may be requirements for insurance for Comprehensive and Liability BEWARE: Watch out for these to ensure they comply with State requirements and DO NOT exceed these as this may restrict competition 35

Terms and Conditions & Provisions Common terms that may be used: Vendor Invoicing requirements LEA payment frequency and method (every 2 weeks, 2/month, 30 days, other) Delivery requirements, if any, and frequency Installation Equipment (provide the utility requirements in the specifications!) POS equipment Others? 36

Certification of Debarment and Suspension A. Methods for certification of debarment and suspension of prospective vendors. Per 2 CFR Part 180 as adopted and modified by USDA regulations at 2 CFR 417, all program participants must ensure that they do not enter into a covered transaction with a suspended or debarred entity by doing one of the following [2 CFR )]: 1. Check the EPLS (Excluded Parties List System) which is a part of the System of Awards Management (SAM). This system lists all suspended and debarred organizations; 2. Collect a State or SFA certification form from the organization stating that they are not suspended or debarred; or, 3. Include a clause in their contract and solicitations. 37

Receiving Responses for IFBs: Fixed price contracts: Bids received sealed Public bid opening Receive and Evaluate Responses Sealed Bid Document

Receiving Responses: Cost reimbursable Sealed 2 parts to responses – price and technical Public opening not required Receive and Evaluate Responses Price 2nd Technical 1st

Evaluating Responses Fixed price contracts: Evaluation is for lowest responsive and responsible along no other dimension than price Receive and Evaluate Responses

Cost reimbursable Evaluation – document review of best technical response according to evaluation criteria and scoring as stated in solicitation Negotiation with top responders Review of price – PRIMARY CONSIDERATION in scoring

Once evaluated, a contract may be awarded and the contract executed. Remember, contracts for FSMCs require prior approval by the State agency Any pre-issuance requirements by the State agency also apply. Does your State agency have pre-issuance requirements in place? Award and Execute the Contract

Manage Contracts 2 CFR Part (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 orders

What is the difference in contract types? Fixed Price contract: Provides a stated price that is fixed Provides the maximum incentive for the contractor to control costs and perform effectively Imposes the least administrative burden on the contracting parties May contain an economic price adjustment tied to an appropriate index

The difference in contract types? Fixed price contract : Price is fixed for the contract duration Price adjustments authorization and procedures, if any must be included in the solicitation, must be tied to a standard index such as the Consumer- Price index, and the frequency of adjustment included Contract duration may be less than one year depending on market conditions.

The difference in contract types? Cost Reimbursable contract : Provides for payment of allowable costs incurred in performing the contract Use when there are uncertainties involved in the contract performance affecting price estimates Frequently occur in the School Nutrition Programs as cost plus fixed fee contract provides for the reimbursement of allowable costs plus the payment of a fixed fee to the contractor

The Principles of Good Procurement Good Procurement Free & Open Competition Fairness and Integrity Responsive and Responsible Transparent

Free & Open Competition Procurement procedures may never unreasonably restrict or eliminate competition, thereby giving an advantage to one vendor/supplier over another. Examples of restrictive competition are:  Placing unfair requirements on vendors/suppliers in order for them to qualify to do business.  Requiring a specific brand name product instead of allowing vendors/suppliers the opportunity to offer a comparable product.

Fairness & Integrity The procurement process cannot be both effective and self-serving. Reasonable consideration must be given to all comparable products and suppliers despite the SFA’s preference for a particular product or supplier. SFAs must ensure that ethical safeguards are maintained at all levels of the organization and in all aspects of the procurement process. No one in the SFA shall participate in the procurement process and/or awarding of a contract if a conflict of interest, real or perceived, is involved.

Fairness & Integrity: Good Practices to Follow  Using the procurement process enables you to obtain quality products or services at the lowest prices.  Develop solicitations that are clear and non-restrictive.  Publicizing solicitations appropriately to the widest possible audience fosters free and open competition.  Write clear evaluation criteria that is not unduly restrictive.  Allow adequate time for vendors/suppliers to respond to your solicitation, ensure transparency in opening and evaluating bids, and make certain the entire process is documented.  Procure the goods or services within the terms of the awarded contract.

Responsive & Responsible SFAs must award contracts only to vendors who are: responsive – those vendors who respond to a procurement solicitation and submit a bid for goods or services that meet the SFA’s requirements responsible – vendors who are capable of successfully performing the terms and conditions of the contract.

Transparent Transparency in the procurement process ensures accountability and cost effectiveness, which is especially important when using federal funds for programs like the child nutrition programs. Everything the SFA does must be clear, upfront and out in the open.

Recapping - Do’s and Don’ts Do Don’t  Ensure purchases are necessary  Document the process from beginning to end  Write clear and concise solicitations and evaluation criteria  Publicize the solicitation and seek as many respondents as possible  Ensure transparency and avoid conflicts of interest  Follow all applicable procurement regulations and requirements  Split purchases to avoid the procurement process  Set unreasonable requirements  Obtain a quote from only one vendor  Award a contract without advertising or based on one or two evaluation criteria  Allow contract changes after a bid has been awarded, which could have altered the outcome if other vendors had been given the opportunity to modify their bid

Please contact us if you have any questions. Child Nutrition Program Administration NYS Education Dept. 89 Washington Ave, Room 375-EBA Albany, NY Phone: