Distinguishing an FSMC From A Vendor

This management bulletin supersedes California Department of Education (CDE) Management Bulletin SNP-07-2016: Distinguishing a Food Service Management Company (FSMC) from a Meal Vendor and Procurement Requirements Overview.

Management Bulletin SNP-09-2018 updates guidance to assist school food authorities (SFA) in determining whether a contract with a company that provides meals is a vended meal contract or an FSMC contract. This management bulletin also provides guidance to SFAs on the procurement requirements for vended meal contracts.

Vended Meal Companies Versus Food Service Management Companies

Meal vendors are companies that prepare and deliver meals for purchase. All meals must meet the federal meal pattern requirements and be ready for service to students. Depending on the time of delivery, SFAs may or may not need to reheat the meals. The vendor is required to document meal temperatures at the time they leave the preparation facility and the SFA is required to document meal temperatures at the time of delivery. Meal vendors must also document menu production, maintain standard recipes, and record the number of meals ordered and delivered.

If an SFA requires the meal vendor to provide staff to serve the meals, prepare the meals at the SFA’s facility, or other food service activities, the U.S. Department of Agriculture (USDA) considers the vendor an FSMC. In such instances, an FSMC procurement is required and the CDE must preapprove the bid process and contract.

Vended Meal Companies

The scope of allowable services provided by meal vendors are:

• Delivering meals
  
  
• Cleaning their own equipment used for meal delivery
  
  
• Receiving, storing, and using USDA Foods on behalf of the sponsor, provided that the CDE approved the vendor to minimally process USDA Foods and meals are prepared at the vendor’s facilities
  
  
• Preparing menus; however, the sponsor must retain control of the School Nutrition Programs (SNP) by ensuring that the menus meet the federal meal pattern requirements for food-based menu planning
  
  
• Completing the daily menu production worksheets

Food Service Management Companies

To aid SFAs in determining whether to solicit the services of a meal vendor or an FSMC, Title 7, Code of Federal Regulations (7 CFR), Section 210.2, defines an FSMC as a commercial enterprise or nonprofit organization which may be contracted with by the SFA to manage any aspect of the school food service. The following activities are within the scope of services provided by an FSMC because they involve managing some aspect of the SFA’s food service program:

• Access to individual student meal eligibility to the extent that such information is necessary for the FSMC to fulfill its obligations under a contract
  
  
• Assume duties typically performed by an SFA employee
  
  
• Collect and provide meal reimbursement claim data
  
  
• Collect meal payments from students or households
  
  
• Conduct point-of-service meal counts
  
  
• Determine student eligibility data for meals
  
  
• Develop menus and menu production records for SFA approval
  
  
• Market the food service program
  
  
• Oversee compliance
  
  
• Order USDA Foods
  
  
• Prepare claims for SFA approval and submission
  
  
• Prepare meals at the SFA’s facilities
  
  
• Provide SFA staff with program guidance and training
  
  
• Provide program oversight or management
  
  
• Purchase food, supplies, or equipment
  
  
• Serve meals, regardless if preplated or prepared off site
  
  
• Supervise SFA staff

This list is not all-inclusive of FSMC services; the intent is to provide a sample of FSMC activities to assist SFAs with understanding when a contract should be for an FSMC.

In accordance with California Education Code (EC) Section 49554, all public school districts contracting with an FSMC that will prepare, deliver, and serve meals must annually submit to the CDE Form PRU-06, Certification of Compliance with California EC 49554 and Request to Contract with a Private Company for Vended Meals. You can access this form through the Child Nutrition Information and Payment System (CNIPS), Download Forms.

State Agency Preapproval Requirement

In accordance with 7 CFR, sections 210.16(a)(10), 210.19(a)(5), 220.7(d)(ix), and 220.16(c)(1), the CDE must preapprove an SFA’s procurement of FSMC contracts, including all contracts, amendments, and contract extensions. Bid documents include the Request for Proposal, public announcement, all proposals received, evaluations or scoring matrix, proposed and executed contract, and any other relevant records to ensure the SFA’s procurement complies with all state, federal, and local procurement laws and regulations. To review the CDE approval timeline, please visit the CDE Procurement in SNPs web page at http://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp and select the Approval tab.

The CDE Nutrition Services Division (NSD) does not currently require preapproval for vended meal contracts, but may do so at a future date. Please note that SFAs must submit a copy of their vended meal contract or contract extension during annual updates and when the contract or extension is initially executed. Submit contracts to the SNP Unit by uploading the contract or extension into the Child Nutrition Information and Payment System (CNIPS) under the Checklist link. SFAs must also complete and submit the CNIPS Vendor Fact Sheet for CDE approval.

Consequences of Noncompliance

If an SFA contracts with an FSMC without obtaining the CDE’s approval, the SFA may be required to:

• Rebid the contract
• Pay the FSMC from a source other than the nonprofit school food service account (cafeteria fund)

If an SFA contracts for vended meals, and that contract is later determined to be an FSMC contract that was obtained without the CDE’s approval, the SFA may be required to:

• Rebid the contract
  
• Repay the cafeteria fund from an allowable nonfederal funding source for all costs incurred under the invalid contract
  
• Pay the FSMC from an allowable nonfederal funding source until the new CDE-approved executed contract is in place

Please note that the SFA may not use the cafeteria fund to reimburse the account used to pay for services the FSMC provided during the invalid contract period. Some contractors may allow an SFA to defer payment until after the contract is approved; however, the SFA cannot use the cafeteria fund to pay the balance due for any FSMC services rendered before the SFA obtained the CDE’s preapproval, and the contract was executed.

The Cafeteria Fund and Control of the Account

Control of the Cafeteria Fund—state and federal laws and regulations require SFAs to retain control of the cafeteria fund and all revenues. SFAs must ensure that all meal payments are made directly to the SFA and that such payments are deposited into the SFA’s cafeteria account in compliance with 7 CFR, Section 210.14(a), and EC, sections 38090 through 38095.

Online Meal Payments and Fees in School Meal Programs—many SFAs offer online services to parents, which may include providing online options for parents to add money to their children’s meal account(s). SFAs can charge a fee for this service, but only if the SFA also offers another method for families to add money to their meal account that does not incur any additional fees to the student. Examples of methods SFAs can use without incurring a fee include accepting money at the school food service office or accepting cash payments at the point of service. As an alternative to charging parents a fee for services, SFAs may use cafeteria funds to cover the cost of providing online services to parents. If the cafeteria fund cannot cover these costs, SFAs can seek outside sources to cover the costs associated with providing this service. Outside funding for this purpose may include monetary donations from the general fund or outside organizations. SFAs interested in using an online payment system should first consult with their School Boards, Board of Directors, or legal counsel. In addition, SFAs must separately, competitively procure the use of an online payment service.

For more information, please refer to Policy Memoranda SP 02-2015 and SP 57-2016 on the USDA Online Fees in the School Meal Programs web page at http://www.fns.usda.gov/online-fees-school-meal-programs and Management Bulletin SNP-03-2017 on the CDE Unpaid Meal Charges and Excess Account Balances web page at https://www.cde.ca.gov/ls/nu/sn/mbsnp032017.asp [Note: The preceding link is no longer valid. It has been superceded by http://www.cde.ca.gov/ls/nu/sn/mbsnp042023.asp.]

Overt Identification—Section 245.8(b) of 7 CFR and EC Section 49557 state that there shall be no overt identification of any children eligible to receive free and reduced-price (F/RP) meals or free milk. Overt identification may occur if SFAs use special tokens, tickets, or any other identifiable means of meal payment. Students eligible for F/RP meals cannot be required to order and pay for meals only through the SFA unless the same rule applies to students ineligible for F/RP meals. For more information on overt identification, please refer to Management Bulletin SNP-05-2015 on the CDE Preventing Overt Identification of Children web page at http://www.cde.ca.gov/ls/nu/sn/mbsnp052015.asp.                                         

Contractor Involvement in Drafting Procurement Documents

SFAs, not the contractors, must develop all bid documents, specifications, and Scope of Work, as well as the subsequent contract. Title 2, Code of Federal Regulations, (2 CFR), Section 200.319, states:

Contractors that develop or draft specifications, requirements, statements of work, Invitations for Bid, or Requests for Proposal must be excluded from competing for such procurements.

Any contract where the contractor participated in developing any part of the bid documents or contract, the CDE will require the SFA to:

• Rebid the contract
• Repay the cafeteria fund from an allowable nonfederal funding source for all costs incurred under the invalid contract

Conflict of Interest and Standards of Conduct Requirements

All SFAs must comply with 2 CFR, Section 200.318, which requires written codes of conduct governing the actions of all employees who are engaged in the selection, award, and administration of contracts. Officers, employees, and agents of the SFA may not solicit or accept gratuities, favors, or anything of monetary value from contractors or subcontractors. For additional information, please view our YouTube video series. Links to these videos are on the CDE Procurement in School Nutrition Programs web page at http://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp and select the Resources tab.

Resources

Additional guidance on procurement, contracts, applicable regulations, and other procurement-related information is on the CDE Procurement in SNPs web page at http://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp.

Contact Information

If you have any questions regarding this management bulletin, you may contact the Procurement Resources Unit (PRU) by email at SFSContracts@cde.ca.gov to be directed to a PRU Specialist [Note: The preceding contact information is no longer valid. Please contact the School Food Service Contracts Unit (SFSCU) by email at SFSContracts@cde.ca.gov to be directed to a SFSCU Specialist].