1. Section 5: Purchasing Rules
Food Purchasing for Child Care Centers
Section 5:
Purchasing Rules

2. Lesson Objectives The learner will be able to
explain why centers must follow Federal food purchasing rules,
select the rules which apply to his/her center, and
verbalize a practical application for each rule.

3. Before Buying Groceries . . .
. . .you need to review food purchasing rules.

4. Words for Purchasing Rules
“Laws”
U.S. Congress
State legislatures
“Regulations”
Federal Agencies
State Agencies
“Policies” and “Procedures”
Local agencies
Board of directors

5. Code of Federal Regulations (C.F.R.)

6. Federal Regulations
Private Non-Profit Centers
7 C.F.R. pt. 3019

7. Federal Regulations
For-Profit Centers
7 C.F.R. pt

8. Federal Regulations
Public Centers
7 C.F.R. pt. 3016

9. Purchase Procedures Formal Purchase Procedure
IFB—Invitation for Bid
RFP—Request for Proposal
Informal Purchase Procedure
Small Purchase Procedure (price quotes)

10. Private Non-Profit Centers
Federal Principles
Private Non-Profit Centers
Must use formal purchase procedures for
purchases of more than $100,000* or
amount stated in their organization’s procedures (if less).
*At press time, USDA was in the process of issuing changes to its child care regulations to increase the current $10,000 small purchase threshold for non-profit centers to this higher level. Check with your State Agency for updates.

11. Federal Principles Public Centers
Must use formal purchase procedures for
purchases of more than $100,000 or
amount stated in State law or local procedures, whichever is less.
*At press time, USDA was in the process of issuing changes to its child care regulations to increase the current $10,000 small purchase threshold for public centers to this higher level. Check with your State Agency for updates.

12. Federal Principles For-Profit Centers
Must use formal purchase procedures for
purchases of more than $10,000.

13. Centers must have written purchasing procedures.
Federal Principles
Centers must have written purchasing procedures.

14. Federal Principles Explanation
Purchase plan approved by board of directors/owners and policies of board of directors/owners become written purchasing procedures.

15. Accounting records must be supported by source documentation.
Federal Principles
Accounting records must be supported by source documentation.

16. Federal Principles Examples of source documentation: Invoices
Grocery receipts
Cancelled checks
Bid documents

17. Federal Principles
The center shall maintain a written standard of conduct for its employees working with the award and administration of purchasing contracts.

18. Federal Principles Examples of standards of conduct:
No employee or board member/owner can
ask for gifts from vendors,
accept unsolicited gifts valuing more than $15, or
accept unsolicited gifts more than twice a year.

19. Federal Principles
Purchasing transactions shall be conducted in a manner to provide full and open competition.

20. Federal Principles Example 1
No unrealistic requirements that restrict competition
Requirement: Grocery stores extend the center 90-day credit.
If only one grocery store can meet this requirement, then competition is restricted.

21. Federal Principles Example 2
No unrealistic delivery requirements that restrict competition
Requirement: Delivery on Monday morning at 7:00 a.m.
Competition restricted to those vendors delivering on Mondays

22. Federal Principles
A center shall not knowingly do business with a company that is debarred or suspended.

23. Federal Principles Definitions Debarred Suspended
Center prohibited from contracting with the company
Suspended
Center temporarily prohibited from contracting with the company

24. Federal Principles
Check the Excluded Parties Listing System (EPLS) at to see if a vendor is debarred or suspended or
Require vendors to certify in writing that they have not been debarred or suspended if
they are responding to an IFB/RFP or
the center expects to spend $25,000 or more with them.

25. Federal Principles specifications requirements statements of work
Contractors excluded from competing if they help develop or draft
specifications
requirements
statements of work
invitations for bid
requests for proposal
contract terms
purchasing procedures

26. Federal Principles Example
A center is considering purchasing a new commercial refrigerator.
It contacts a local commercial food service equipment distributor to help write the specifications.
When the request for pricing is issued, this distributor will not be eligible to offer a price.

27. Federal Principles
A clear and accurate description of the technical requirements shall be provided for everything that is purchased.
Peaches, canned: sliced; packed in light syrup; to meet U.S. Grade B standard; 24/No. 2½ cans per case.

28. Federal Principles
All factors that will be considered when deciding where to purchase food and supplies shall be listed in the instructions of a sealed bid or proposal.

29. Federal Principles Examples
Delivery to the center shall be made after 1:00 p.m. on a day selected by the vendor.
Net 30-day credit terms shall be extended to the center.

30. Federal Principles
The use of local geographic preference laws in deciding where and what to purchase is not permitted in Child Nutrition Programs.

31. Federal Principles Example A State writes a law that says that
apples grown in the State where the center is located can be 5% higher and
the center should buy these apples.
Centers belonging to the CACFP cannot use this law to purchase the higher-priced apples.

32. Federal Principles
Centers shall ensure that small businesses, minority-owned firms, and women’s business enterprises have an opportunity to compete.

33. The pricing method used shall be determined by the center.
Federal Principles
The pricing method used shall be determined by the center.

34. Federal Principles
The “cost-plus-a- percentage-of-cost” pricing method shall not be used.

35. Federal Principles Example
A large center buys from several institutional distributors and must obtain price quotes from all the distributors.
Palm Tree distributor suggests that the director could save time by allowing them to quote a price of 15% over cost.
With this method the invoice would automatically be priced and it would not be necessary to get price quotes.
This type of pricing is not allowed.

36. Contracts shall be made only with responsible contractors.
Federal Principles
Contracts shall be made only with responsible contractors.

37. Federal Principles Example
An institutional distributor had a center’s contract last year.
The fill rate (percentage of items delivered) was below 75% of the items ordered.
The distribution industry standard is 98%.
Thus, this distributor is not responsible.
The center should not make another contract with this distributor.

38. Federal Principles Suggestions
Document poor performance by keeping copies of phone calls or letters to a contractor.
In the instructions for next IFB:
Specify required fill rate,
Require potential vendors to provide their fill rate for the prior year, and
State that the center will not consider a supplier responsible if there is a record of poor performance.

39. Federal Principles
Centers shall make purchasing documents available for review by the Federal or State Agency when requested.

40. Federal Principles Conditions for requesting documents:
The State Agency is conducting a review.
The purchasing procedures fail to comply with Federal requirements.
The purchase is expected to be
more than the small purchase threshold (currently $100,000) and
made without competition.

41. Federal Principles
Conditions for requesting documents:
The purchase is expected to exceed the small purchase threshold and the description specifies a brand name.
Example: Catsup: 24/12-oz bottles per case; Tomato brand only.

42. Federal Principles Conditions for requesting documents:
The purchase method is a sealed bid (IFB) and the purchase is expected to be
more than the small purchase threshold and
awarded to a company other than the responsive low bidder.

43. Federal Principles Conditions for requesting documents:
A contract modification changes the amount of the contract by more than the small purchase threshold.

44. Some form of cost analysis shall be performed for all purchases.
Federal Principles
Some form of cost analysis shall be performed for all purchases.

45. Federal Principles Example Price of Whole Milk per Gallon:
Store 1: $2.91
Store 2: $2.87
Store 3: $2.93

46. Federal Principles Purchasing records shall be kept for a period of
three years from the end of the fiscal year the purchase is made (unless the State Agency requests a longer period),
three years from the end of the fiscal year the last purchase is made (if multi-year contract), or
until an audit or investigation is officially closed.

47. National Food Service Management Institute
This training was conducted by the
National Food Service Management Institute
The University of Mississippi

48. National Food Service Management Institute The University of Mississippi
Mission: To provide information and services that promote the continuous improvement of child nutrition programs
Vision: To be the leader in providing education, research, and resources to promote excellence in child nutrition programs