Procurement in School Nutrition Programs

Definitions

• Food Service Management Company
• Meal Vendor
• Net Cash Resources
• Nonprofit School Food Service (or Cafeteria) Account and Revenues
• School Food Authority

Food Service Management Company

National School Lunch Program regulations under Title 7, Code of Federal Regulations (7 CFR), Section 210.2 define a food service management company (FSMC) as “a commercial enterprise or a nonprofit organization which is or may be contracted with by school food authority (SFA) to manage any aspect of the school food service.” A company is considered an FSMC if it performs all or a combination of the following services:

• Providing consulting services
• Developing menus and menu production records
• Preparing, delivering, and/or serving meals
• Organizing and maintaining program documents (such as daily meal counts, menus, and menu production records)
• Preparing claims for SFA approval and submission
• Purchasing food, supplies, and/or equipment
• Providing program guidance and training
• Maintaining bookkeeping records
• Implementing other activities that would normally be performed by the SFA

Meal Vendor

Companies preparing and delivering meals to SFAs are meal vendors. In this capacity, a meal vendor may also develop menus and menu production records. Should additional services be provided, such as the activities listed under the FSMC definition above (usually performed by the SFA when contracting with a meal vendor), such services may constitute food service management and would need to be solicited and procured as such.

Meal vendors may not access individual student meal eligibility information, collect meal payments, conduct point of service meal counts, provide program oversight, collect claim data, or act as an employee of or agent for the SFA.

Net Cash Resources

According to 7 CFR, Section 210.2, net cash resources means all monies (as determined by the California School Accounting Manual), that are available or have accrued to an SFA’s nonprofit school food service at any given time, less cash payable. Such monies may include, but are not limited to, cash on hand, cash receivables, earnings on investments, cash on deposit, and the value of stocks, bonds, or other negotiable securities.

Nonprofit School Food Service (or Cafeteria) Account and Revenues

Federal regulations in 7 CFR, Section 210.2, define the nonprofit school food service (or cafeteria) account and revenues as follows:

. . . the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in 7 CFR, Section 210.14(e), and proceeds from non-program foods as provided in 7 CFR, Section 210.14(f). . . .

Revenue, when applied to nonprofit school food service, means all monies received by or accruing to the nonprofit school food service in accordance with the State agency's established accounting system including, but not limited to, children's payments, earnings on investments, other local revenues, State revenues, and Federal cash reimbursements.

New and accrued revenues may include, but are not limited to, federal and state meal reimbursements, meal payments from children and adults, money received from a la carte and vending machine food sales, and catering activities.

School Food Authority

The term SFA, as defined in 7 CFR, Section 210.2, means the governing body responsible for the administration of one or more schools that has the legal authority to operate the federal school meal programs or is otherwise approved by the U.S. Department of Agriculture to operate such programs.

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Procurement

• Open and Free Competition Requirement
• Buy American Provision
• Request for Proposal (RFP) or Invitation for Bid (IFB)
• Procurement History and Records
• Bid Process for Food Service Management Company (FSMC) Contracts
• Bid Process for Vended Meal Contracts
• Best Practices

Open and Free Competition Requirement

Both federal regulations and California state laws require all procurements—without regard to dollar value—to be conducted in a manner that promotes maximum open and free competition. School Food Authorities (SFAs) must conduct either a formal or an informal bidding process.

According to Title 2, Code of Federal Regulations (2 CFR), Part 200.319(b), situations limiting competition include, but are not limited to:

1. Placing unreasonable requirements on firms in order for them to qualify to do business
   
   
2. Requiring unnecessary experience and excessive bonding
   
   
3. Noncompetitive pricing practices between firms or between affiliated companies
   
   
4. Noncompetitive awards to consultants that are on retainer contracts
   
   
5. Organizational conflicts of interest
   
   
6. Specifying only a brand name product, instead of allowing an equal product to be offered and describing the performance or other relevant requirement of the procurement
   
   
7. Any arbitrary action in the procurement process
   
   

Any action that diminishes open and free competition undermines the integrity of the procurement process and may subject the SFA to bid protests. Pursuant to 2 CFR, Part 200.318(k), SFAs must be responsible in accordance with good administrative practices and sound business judgment for the settlement of all contractual and administrative issues arising out of procurements.

SFAs may not enter a contract prepared by a bidder. Federal regulations in 2 CFR, Part 200.319(b), prohibit sponsors from awarding a contract to any contractor that prepares or has a significant role in developing the contract and related bid documents; e.g., a price quote, RFP, Invitation for Bid, or bid specifications. After contract negotiations, the SFA (not the selected contractor) must incorporate all changes into the final contract.

SFAs receiving state funds also need to comply with California Public Contract Code (PCC), Section 20112.

Buy American Provision

Buy American Provision Requirements

Section 104(d) of the William F. Goodling Child Nutrition Reauthorization Act of 1998 (PL 105-336) added a provision, Section 12(n) to the National School Lunch Act (NSLA) (42 United States Code [U.S.C] 1760(n)), requiring SFAs to purchase, to the maximum extent practicable, domestic commodities or products. This Buy American provision supports the mission of the child nutrition programs, which is to serve children nutritious meals and support American agriculture.

Using food products from local sources supports local farmers and provides healthy choices for children in the school meal programs while supporting the local economy. Requiring compliance with the Buy American provision also supports SFAs working with local, or small, minority, and women-owned businesses as required by Federal regulations (see 2 CFR 200.321). The Food and Nutrition Service (FNS) also encourages purchasing food products from local and regional sources when expanding farm to school efforts.

The Buy American provision applies to SFAs located in the 48 contiguous United States and is one of the procurement standards these SFAs must comply with when purchasing commercial food products served in the school meals programs.

Section 12(n) of the NSLA defines “domestic commodity or product” as an agricultural commodity that is produced in the U.S. and a food product that is processed in the U.S. substantially using agricultural commodities produced in the U.S. As codified in the final rule for the Buy American provision update, effective July 1, 2024, “substantially using agriculture commodities that are produced in the United States” means over 51 percent of a food product must consist of agricultural commodities that were grown domestically. Therefore, over 51 percent of the final processed product (by weight or volume) must consist of agricultural commodities that were grown domestically. Thus, for foods that are unprocessed, agricultural commodities must be domestic, and for foods that are processed, they must be processed domestically using domestic agricultural food components that are comprised of over 51 percent domestically grown items, by weight or volume as determined by the SFA.

For products procured by SFAs for use in the child nutrition programs using nonprofit food service account funds, the product's food component is considered the agricultural commodity. FNS defines food component as one of the food groups which comprises reimbursable meals. The food components are:

• Meats and meat alternates
• Grains
• Vegetables
• Fruits
• Fluid milk

Please refer to Title 7, Code of Federal Regulations (7 CFR) 210.2 for full definitions. Any product processed by a winning vendor must contain over 51 percent of the product's food component, by weight or volume, from U.S. origin. This definition of domestic product serves both the needs of schools and American agriculture. Products from Guam, American Samoa, Virgin Islands, Puerto Rico, and the Northern Mariana Islands are considered domestic products under this provision as these products are from the territories of the U.S.

Regulations require that SFAs include Buy American requirements provisions in all procurement procedures, solicitations, and contracts. The CDE has sample procurement procedures available for use. These procedures include the Buy American provisions and justification requirements and are available in Child Nutrition Information and Payment System (CNIPS) Download Forms, Form ID PRU-08b Procurement Sample.

For additional information on the Buy American Provision, please see U.S. Department of Agriculture (USDA) Policy Memorandum (Policy Memo) SP 38-2017 , Compliance with and Enforcement of the Buy American Provision in the National School Lunch Program .

Final Rule

On April 25, 2024, the USDA published the final rule, Child Nutrition Program: Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans 89 FR 31962. Among other provisions, this rule finalizes regulations that strengthen the School Meal Programs’ Buy American provision. The final rule for the Buy American provision update is effective July 1, 2024, some provisions have future phased-in implementation dates.

For additional information on these updates, please see USDA Policy Memo SP 23-2024 , Buy American Provisions Related to the Final Rule Titled, Child Nutrition Programs: Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans.

Harvested Fish

In order to comply with the Buy American Provision requirements:

• Farmed fish must be harvested within the United States or any territory of the United States.
• Wild caught fish must be harvested within the Exclusive Economic Zone of the United States or by a United States flagged vessel.

For additional information on the Buy American Provision and the Agriculture Improvement Act of 2018, please see U.S. Department of Agriculture (USDA) Policy Memo SP-32-2019, Buy American and the Agriculture Improvement Act of 2018 on the USDA Food and Nutrition Service Documents & Resources webpage.

Implementing the Buy American Provision

SFAs are reminded that for all procurement transactions for food when funds are used from the nonprofit food service account, whether directly by an SFA or on its behalf, procurement transactions must comply with the Buy American provision. Implementation of the Buy American provision should be done by: including Buy American in documented procurement procedures, state agency prototypes documents, and all procurement solicitations and contracts; including domestic requirements in bid specifications; contract monitoring; and verifying cost and availability of domestic and nondomestic foods using data in the USDA Agricultural Marketing Service's (AMS) weekly market report located in the Market News - Fruit and Vegetable - Custom Reports webpage .

USDA Foods Comply with Buy American Provision Requirements

SFAs are encouraged to maximize their use of USDA Foods, which comply with Buy American Provision requirements. USDA Foods are domestic, purchased from 100 percent domestic origin sources, which is a long standing USDA policy based on Section 32 of the Agriculture Act of 1935 (Public Law 74-320 as amended; 7 U.S.C. 612c). However, processed end products that contain USDA Foods need to meet the minimum requirement of 51 percent domestic, by weight or volume.

Limited Exceptions to the Buy American Provision

The USDA codified in regulations the two limited exceptions when non-domestic foods may be purchased by school food authorities. USDA also added to the first exception the option to use the Title 48, Code of Federal Regulations (48 CFR)25.104 Nonavailable articles list , as a list of excepted items.

The final rule codifies the two limited exceptions as follows:

1. The product is listed on the Federal Acquisitions Regulations (FAR) Nonavailable articles list and/or is not produced or manufactured in the U.S. in sufficient and reasonably available quantities of a satisfactory quality; or
2. Competitive bids reveal the costs of a domestic product are significantly higher than the non-domestic product.

Note: The final rule for the Buy American provision update is effective July 1, 2024.

The California Food and Agriculture Code (FAC) 58596.3, requires SFAs that receive $1 million or more annually in federal child nutrition program reimbursement to solicit bids for the purchase of an agricultural food product to include in their solicitation for bids and contracts that only the purchase of agricultural food products grown, packed, or processed domestically is authorized, unless any of the following applies:

1. The bid or price of the nondomestic agricultural food product is more than 25 percent lower than the bid or price of the domestic agricultural food product.
2. The quality of the domestic agricultural food product is inferior to the quality of the agricultural food product grown, packed, or produced nondomestically.
3. The agricultural food product is not produced or manufactured domestically in sufficient and reasonably available quantities of a satisfactory quality to meet the needs of the Local Agency.

Cap on Non-Domestic Food Purchases

The USDA established in regulations a new threshold for school food authorities that use exceptions. The limit on the percentage of total commercial food costs from non-domestic foods will be phased in over seven school years.

• Beginning in School Year (SY) 2025–26, the non-domestic food purchases cap will be 10 percent.
• Beginning in SY 2028–29, the non-domestic food purchases cap will be 8 percent.
• Beginning in SY 2031–32, the non-domestic food purchases cap will be 5 percent.

Note: This phased-in approach will allow schools to gradually adjust to the new requirement and will allow USDA to continue to collect data on use of the Buy American exceptions. Items listed on the FAR Nonavailable articles list must be counted toward the cap on non-domestic purchases when it goes into effect.

Before using an exception, SFAs should first consider and document their responses to the following questions:

• Are there any other domestic sources for this product?
• Is there a domestic product that could easily be substituted for the nondomestic product on the menu (e.g. substitute domestic pears for nondomestic apples)?
• Am I soliciting bids for this product at the best time of year? If I contracted earlier or later in the season, would prices and/or availability change?
• Am I using third-party verification, such as through the USDA Agricultural Marketing Service Web page to determine the cost and availability of domestic and nondomestic foods? For more information, please visit the USDA Agricultural Marketing Service Weekly Market Report web page.

Exception Documentation and Reporting Requirements

Regulations require SFAs to maintain documentation to demonstrate the use of exceptions. Items found on the FAR 25.104 Nonavailable articles list , are exempt from the documentation requirement, but these items must be counted toward the cap on non-domestic purchases when that goes into effect.

The USDA developed an optional Buy American Standard Tracking Form Template that SFAs can use to track both the exceptions and costs related to non-domestic product purchases. When SFAs purchase a product found on the FAR 25.104 Nonavailable articles list , this must be included on the tracker for the purpose of accurately tracking total non-domestic costs. The CDE encourages the use of the Buy American Tracking Form Template to document the use of exceptions to purchase non-domestic foods under the Buy American provision. The Buy American Standard Tracking Form is available in the CNIPS, Download Forms, Form ID PRU 10.

Note: The final rule for the Buy American provision update is effective July 1, 2024.

For questions related to the limited exceptions to Buy American requirement, cap on non-domestic food purchases, and exception documentation and reporting requirements, please reach out to email the Nutrition Services Division at NSDBuyAmericanProvision@cde.ca.gov.

SFA Compliance Monitoring of the Buy American Provision

To ensure compliance with the Buy American provision the SFA must ensure solicitation and contract language includes the requirement for domestic agricultural commodities and products. The SFA must also include the Buy American requirement in its documented procurement procedures and retain records documenting any exceptions. SFAs should ask the supplier, i.e., manufacturer or distributor, for specific information about the percentage of U.S. content in any processed product. For SFAs to be able to document the domestic content, they should include in their procurement process a requirement for certifying the domestic percentage of the agricultural food component of commodities and products.

Further, solicitation and contract language must be monitored by the SFA to determine contractor compliance as required by 2 CFR 200.318(b), to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. Monitoring is also accomplished by reviewing products and delivery invoices or receipts to ensure the domestic food that was solicited and awarded is the food that is received. SFAs also need to conduct a periodic review of storage facilities, freezers, refrigerators, dry storage, and warehouses to ensure the products received are the ones solicited, and awarded, and comply with the Buy American provision.

State Agency Monitoring of the Buy American Provision

State agencies conducting procurement reviews in conjunction with, or as a separate review from, the administrative review process must ensure SFA compliance with the Buy American provision.

During a procurement review, state agencies will perform the following:

1. Determine if SFAs are purchasing domestic commodities as defined in 7 CFR 210.21(d),
2. Check that solicitations and contracts contain the Buy American certification language, and
3. Review a sample of supplier invoices or receipts to determine whether the solicited-for domestic foods were provided by the awarded contractor.

If the SFA is non-compliant with the Buy American provision, the state agency will issue a finding and require corrective action which may include:

• Requiring contract amendments to include language to supply domestic foods, or a new solicitation if the contract amendment is determined, by the contracting parties or state agency, to be a material change,
• Attending a procurement training to increase compliance with procurement standards, including the Buy American provision, and
• Fiscal action for repeat or egregious findings, on a case-by-case basis with approval by the appropriate FNS regional office.

During an on-site administrative review, state agencies will evaluate labels on a variety of food products in SFA storage facilities and if the state agency identifies non-domestic foods, the state agency will request documentation justifying the limited exception(s) outlined above. If such is not provided, the state agency must issue a finding and require corrective action, which may include:

• Requiring review of food deliveries for contractor compliance,
• Monitoring to ensure the correct domestic food components contracted for are delivered,
• Prior to accepting foods, ensuring that an alternative domestic food component, or an exception to purchase non-domestic foods, has been approved for delivery, and
• Fiscal action for repeat or egregious findings, on a case-by-case basis with approval by the appropriate FNS regional office.

The Child Nutrition Program Integrity rule added the review of Buy American requirements to regulations that govern state agency reviews of SFAs. As there may be SFAs that have challenges in meeting the non-domestic food purchases cap, state agencies will review this requirement through the Administrative Review process. The Child Nutrition Programs: Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans final rule provides states with discretion to allow an accommodation for temporary relief from this requirement while the SFA works to increase their domestic food purchases (see 7 CFR 210.21(d)(8)).

Request for RFP or IFB

RFPs, also known as competitive proposals (2 CFR, Part 200.320(b)(2)), is a method of procurement whereby SFAs publicly solicit a technical proposal that explains how the prospective contractor will meet the objectives of the solicitation, and includes a cost element that identifies the costs to accomplish the technical proposal. While price alone is not the sole basis for award, it remains the primary consideration when awarding a contract under the RFP method. SFAs seeking proposals from a food service management company (FSMC) should use the RFP method of procurement.

IFBs, also known as competitive sealed bids (2 CFR, Part 200.320(b)(1)), is a formal method of procurement in which SFAs publicly solicit sealed bids from an adequate number of known suppliers, with the goal of obtaining three bids at a minimum. The SFA must award the fixed-price contract to the lowest priced, most responsible bidder, whose bid is responsive, and conforms with all the material terms and conditions of the IFB. SFAs must allow bidders sufficient time to respond prior to the date set for opening the bids. SFAs seeking proposals from meal vendors should use the IFB method of procurement.

Regardless of the type of bid method an SFA uses, SFAs must award the contract to the lowest bidder who best meets the SFA’s needs and stated objectives. The SFA must retain all bidding documents for three years after the final contract payment and, in the event of an audit, three years beyond the final audit resolution.

The RFP and IFB are important documents for setting parameters and conditions for the resulting contract. The SFA should adhere to their existing procurement plan or procedures to ensure a consistent procurement process; if there are no procedures or plan currently in place, the SFA should develop a procurement plan or procedure. Preparing and issuing an RFP or IFB includes the following steps:

1. Develop a written solicitation that contains the scope of work (SOW) or specifications, instructions for vendors, and the general terms and conditions of the procurement. Must include the SOW and sample contract. Include details such as estimated quantity required, delivery needs, packing conditions. If purchasing food, include the Buy American provision.
   
   
2. Publicly advertise the solicitation in a newspaper of general circulation in the district one week apart. May also advertise online.
   
   
3. Establish a date and time for opening of proposals/bids. (IFBs must be publicly opened at time and place prescribed in the solicitation).
   
   
4. Evaluate the bids/proposals received.
   
   
5. Award the contract to a responsive and responsible bidder who offers the most advantageous proposal (with price and other factors considered) for an RFP or the lowest price for an IFB.
   
   
6. Monitor contract to ensure you receive everything the contract stipulates from the vendor.
   
   

Procurement History and Records

As required by 2 CFR, Part 200.318(i), SFAs and FSMCs must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following:

• Rationale for the method of procurement
• Selection of contract type
• Contractor selection or rejection
• Basis for the contract price 

Bid Process for FSMC Company Contracts

FSMC contracts must be obtained through a competitive bidding process, using either formal or informal bidding procedures. SFAs must submit all bid documents to the CDE SFSCU for approval prior to issuance (7 CFR, sections 210.19[a][5] and 220.16[c][1]).

Bid documents and questions can be sent to the SFSCU by email at SFSCONTRACTS@cde.ca.gov.

Pursuant to 7 CFR, Section 210.16(d), FSMC contracts shall be of a duration no longer than one year. The initial contract can include an option to renew for no more than four additional one-year terms.

For more guidance on contracting with an FSMC, please review the Approval tab and Resources tab for federal regulations and policies; the U.S. Department of Agriculture Contracting with Food Service Management Companies: Guidance for School Food Authorities manual; and relevant CDE management bulletins.

Bid Process for Vended Meal Contracts

SFAs contracting for vended meals, which are usually limited to preparation and delivery, should prepare a written IFB and provide it to as many potential bidders as possible. Vended meal procurements must follow a competitive procurement process. The goal of an IFB is to obtain two or more bids. SFAs may not bypass the competitive bidding process by entering a contract as a result of negotiations with only one contractor or vendor.

At this time, SFAs contracting for vended meals do not need to submit bid documents to the CDE for prior approval; however, SFAs must submit a signed copy of the contract and annual contract extensions to the CDE during the annual update process.

Meal vendors may not:

• Access individual student meal eligibility
• Act as an employee of, or agent for, the SFA
• Collect claim data
• Collect meal payments
• Conduct point of service meal counts
• Provide program oversight

Upon request, SFAs shall make all bid documents available for review to the CDE, the USDA, and the USDA Office of Inspector General. The CDE retains the right to request bid documents from any SFA for prior approval (7 CFR, sections 210.21[c][1], 215.14a[c][1], and 220.16[c][1]).

Best Practices

As a best practice, the following items should be included in your food service management company contracts:

• Record retention policy for competitive foods. See the California Department of Education Competitive Food and Beverages web page for more information.

• Geographic Preference. The USDA Procuring Local Foods web page contains a guide, fact sheet, policy memos and regulations, as well as the Finding, Buying, and Serving Local Foods Webinar series to help ensure that agencies have the resources and knowledge necessary to incorporate local foods into their day-to-day operations.

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Bid Thresholds

In all competitive procurements, school food authorities (SFA) will use federal, state, or local bid thresholds to determine whether to use the Formal Procurement or Informal Procurement process.

Current Bid Thresholds

The current micropurchase threshold is $10,000 as established by Federal Acquisition Regulations (FAR) and published in NSD Management Bulletin CNP-01-2024. Per the recent update to Title 2 Code of Federal Regulations (2 CFR), Section 200.320(a)(1)(iv), CNP Operators have the option to establish a threshold up to $50,000 on an annual basis, see Food and Nutrition Service (FNS) Policy Memo SP02-2022 Corrected (PDF). To increase the local threshold above $10,000, see self-certification requirements below. Increasing the threshold up to $50,000 requires a self-certification process. SFAs choosing to self-certify must include a justification, clear indication of the threshold, and supporting documentation of any of the following:

• A qualification as a low-risk auditee, in accordance with the criteria in 2 CFR 200.520;
• An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or
• For public institutions, a higher threshold consistent with State law.

The federal small purchase threshold is currently set at $250,000 (increased from $150,000 effective August 1, 2018). Each CNP Operator needs to determine whether they must adhere to the federal small purchase threshold of $250,000 or a more restrictive small purchase threshold set by their agency/district or local government. The small purchase threshold is per contract cost. A CNP Operator cannot deliberately split transactions into amounts below the small purchase threshold to circumvent using the formal procurement method.

As a reminder, on January 1, 2018, amendments to the Public Contract Code (PCC) Section 20111, permitted public school districts (PSD) and County Offices of Education (COE) to follow the federal small purchase threshold, unless their local small purchase threshold is more restrictive.

CNP-12-2018, November 2018, CA PCC sections 20110-20118

Formal Procurement

A formal procurement process is primarily used to purchase food and/or services when the one-year procurement cost exceeds the applicable small purchase threshold. This situation applies to most contracts between SFAs and food service management companies. As part of the competitive bidding process, SFAs must issue and publicly advertise a Request for Proposal (RFP) or Invitation for Bid (IFB) for any procurement equal to or over the applicable small purchase threshold. For more details on the RFP and IFB method of procurement, see the Procurement tab.

Informal Procurement

An informal procurement process may be used when the one-year cost for the purchase of food, services, and/or supplies from a wholesaler, retailer, or vendor is less than the applicable small purchase threshold. Although less rigorous than the formal procurement method, SFAs must still use a competitive bidding process. The SFA must contact a minimum of two known suppliers and obtain competitive price quotations. SFAs are permitted to negotiate prices and terms with one or more of the suppliers contacted. SFAs must ensure that all suppliers receive the same information about the requested food, services, and/or supplies. To the extent possible, SFAs should compare equivalent food, services, and/or supplies, and inform all suppliers of any special need that may affect the price. An example of a special need would be the delivery of the product to a specific building or kitchen.

Bid quotes initially obtained by phone must be documented in writing, with the bidder providing written confirmation about items or services to be provided and prices discussed; such documentation must be retained as part of the procurement documents and is subject to examination and audit by applicable federal and state regulatory agencies. 

Using the informal procurement method, SFAs may directly contact potential competitive sources. The decision whether to formally advertise or simply contact three or more potentially qualified sources is left to the SFA.

Please note that SFAs must always adhere to procurement regulations when purchasing any amount of goods or services using cafeteria funds. Both the formal and informal procurement processes must comply with all applicable federal and state regulations and guidance, and use:

• A standard of conduct or guidelines for conducting compliant procurements; for example, any bidder who develops specifications, requirements, scope of work, RFPs or IFBs, contract terms and conditions, or other documents used in the resulting contract, is excluded from competing for the contract award
  
  
• Open and full competition (2 CFR, Part 200.319(a)]

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Program Control

• Overview
• No Adverse Impact to District Personnel
• A La Carte Food Services
• Control of Cafeteria Account
• Confidentiality and Disclosure of Eligibility Status
• Volunteer Groups

Overview

A school food authority (SFA) may contract with a food service management company (FSMC) to perform one or more of the following activities for the SFA’s nonprofit food service operation, at one or more of its schools (Title 7, Code of Federal Regulations [7 CFR], Section 210.16[a]): 

• Providing consulting services
  
  
• Developing menus and menu production records
  
  
• Preparing, delivering, and/or serving meals
  
  
• Organizing and maintaining program documents (such as daily meal counts, menus, and menu production records)
  
  
• Preparing claims for reimbursement for SFA approval and submission per 7 CFR, Section 210.16(a)(5), FSMCs are not allowed to submit claims
  
  
• Purchasing food, supplies, and/or equipment
  
  
• Providing program guidance and training
  
  
• Maintaining bookkeeping records
  
  
• Implementing other activities normally performed by the SFA

SFAs must remain financially responsible for their school food service programs and retain control over the quality, extent, and general nature of their food service operations and the meal prices charged to children (7 CFR, Section 210.16[a][4]).

SFAs must also retain control of the SFA’s nonprofit school food service (cafeteria) account, development and adjustment of the 21-day cycle menu, signature authority on the SFA’s agreement with the California Department of Education (CDE), and the SFA’s Claims for Reimbursement (7 CFR, sections 210.3[d], 210.7, 210.8[a] and [b], 210.9[b][10], 210.10[a][3], 210.16[a], 220.7[d][1][iv] and [v], 220.10, and 220.11). 

In addition, SFAs shall:

• Adhere to the procurement standards specified in 7 CFR, sections 210.21 and 220.16, Title 2 Code of Federal Regulations (2 CFR) 200.318 and 200.318(b)-200.326, and 2 CFR Appendix II Part 200(A), when contracting with an FSMC
  
  
• Ensure that the food service operation conforms with the SFA’s Permanent Single Agreement with the CDE under the applicable school nutrition program
  
  
• Monitor the food service operation through periodic on-site visits of all participating sites

No Adverse Impact to District Personnel

According to California Education Code (EC), Section 45103.5, contracting with an FSMC shall not cause or result in the elimination of or adversely impact public school district personnel and positions. An FSMC consultant(s) may not supervise district personnel.

Contracts for Prepared Meals

According to EC, Section 49554, a school district may contract for the preparation, delivery, and service of meals, if the school district has had no food service employees since July 1, 1977, or has inadequate or no food preparation facilities as determined by the CDE, and is therefore unable to provide adequate meals. Prior to contracting for such services, the school district shall certify to the CDE that no school district in the county nor the county superintendent of schools has the facilities and is willing to furnish those services.

A La Carte Food Services

According to 7 CFR, Section 210.16(a), no SFA may contract with an FSMC to operate an a la carte food service, unless the FSMC agrees to offer free, reduced-price, and paid reimbursable lunches to all eligible children.

Control of Cafeteria Account

The cafeteria account is a restricted account in which the SFA retains and expends its revenues only for the operation and improvement of the nonprofit school food service. SFAs shall not use funds from the cafeteria account to purchase land or buildings, or to construct buildings, unless otherwise approved by the U.S. Department of Agriculture; (7 CFR, sections 210.2 and 210.14[a]). Revenues that shall accrue to the cafeteria account include, but are not limited to, child and adult meal payments, earnings on investments, other local revenues, state revenues, and federal cash reimbursements (7 CFR, Section 210.2).

SFAs shall not allow non-district staff access to the cafeteria account. Pursuant to EC Section 38094, a district’s governing board shall designate custody and control of the cafeteria account to one or more district employees who shall be responsible for recording revenues and expenditures. Effective July 1, 2011, profit sharing between the food service and other district-associated bodies (e.g., student or parent groups) is not permitted (Public Law 111-296, Healthy, Hunger-Free Kids Act of 2010, sections 206 and 208). Amendments to the Richard B. Russell National School Lunch Act and the Child Nutrition Act of 1966 further require that all revenues from the sale of non-program foods accrue to the cafeteria account solely for the operation or improvement of the food service program. Pursuant to 7 CFR, Section 210.19(a)(1) SFAs:

. . .shall meet the requirements for the allowability of nonprofit school food service expenditures in accordance with this part and, 2 CFR Part 200, as applicable. All costs resulting from contracts that do not meet the requirements of this part are unallowable nonprofit school food service account expenses… .

Confidentiality and Disclosure of Eligibility Status

According to EC Section 49558, all applications and records related to free or reduced-price meal eligibility must be kept confidential, and may not be disclosed for any purpose not directly connected with the administration of any free or reduced-price meal program. In accordance with 7 CFR, Section 210.8(a)(5), and the CDE Permanent Single Agreement for Child Nutrition Programs, SFAs shall provide such application information and records, on request, to the CDE and U.S. Department of Agriculture for audits or reviews.

An SFA shall not disclose a child’s eligibility status during the process of providing free and reduced-price meals. This includes any overt identification in regard to the free and reduced-price benefit notification, provision of meals in the cafeteria, point of sale  (POS) meal count, or method of payment.

In addition, EC Section 49557 and 7 CFR, Section 245.8, require SFAs to take all actions necessary to ensure compliance with the following nondiscrimination practices for children eligible to receive free and reduced-price meals or free milk:

• The names of the children shall not be published, posted, or announced in any manner.
  
  
• There shall be no overt identification of any of the children by the use of special tokens or tickets or by any other means.
  
  
• The children shall not be required to work for their meals or milk.
  
  
• The children shall not be required to use a separate dining area, go through a separate serving line, enter the dining area through a separate entrance, or consume their meals or milk at a different time.
  
  
• When more than one lunch, breakfast, or type of milk is offered that meets the requirements in 7 CFR, sections 210.10 and 220.8, or the definition of milk in 7 CFR, Section 215.2, the children shall have the same choice of meals or milk available to children who pay the full price for meals or milk.

Volunteer Groups

Federal regulations (7 CFR Section 210.9) and EC Section 35161 require SFAs to retain control of the food service program and finances. Volunteer groups, such as parent–teacher associations, may assist the food service operation in limited capacities. Allowable activities include menu planning, enhancement of the eating environment, Program promotion, and related student-community support activities (7 CFR 210.12[a]). EC Section 49515 requires, to the extent feasible and practicable, public school districts with food service programs to include parents of needy pupils in the planning, preparation, and serving of meals at school.

California public schools are considered civic centers under EC Section 38131. As such, certain organizations may, with school board approval, use the school from time to time for specific activities. Pursuant to EC Section 38133(c), the use of school facilities shall not interfere with the regular conduct of school work.

Pursuant to EC Section 38094, the SFA shall designate an employee or employees of the district to have custody of the nonprofit food service (cafeteria) account(s), who shall be responsible for all moneys required to be paid into the account(s), and for all expenditures made from the account(s).

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Approval Process

• Overview
• Timeline to Obtain Approval from the California Department of Education
• Approval Process for Contract Amendments or Extensions

Overview

The program operator is required to obtain written approval from the CDE for all FSMC Requests for Proposal (RFP), Invitations for Bid (IFB), and contract documents before issuance and execution in accordance with Title 7, Code of Federal Regulations (7 CFR), sections 210.16(a)(9) and (10). Should a program operator fail to obtain CDE approval prior to advertising the RFP or IFB executing the contract; the CDE will consider the program operator noncompliant with federal procurement regulations. Consequently, the CDE may withhold program funds and the program operator will need to use other funds to pay the FSMC until approval has been granted (7 CFR, sections 210.21[f][2] and 210.24.)

The CDE procurement approval process starts with the program operator completing the CDE procurement questionnaire prior to submitting their RFP or IFB to the CDE. The form is available on the Child Nutrition Information and Payment System (CNIPS), Download Forms, Form ID PRU-09. The procurement questionnaire includes a list of programs that the sponsor operates.

Timeline to Obtain Approval from the California Department of Education

Most FSMC contracts are effective July 1. Considering the length of time required to conduct a competitive proposal process and obtain CDE approval, program operators should submit their bid solicitation documents to the CDE at least 120 days prior to the anticipated contract execution date. Program operators using the CDE sample RFP and Model Fixed-price Contract are not exempt from obtaining CDE approval prior to RFP publication and subsequent contract execution.

To obtain approval to execute a contract, the CDE suggests that program operators adhere to the following steps and calendar day timeline:

1. Submits their bid package to the CDE
2. CDE preapproval of bid package documents (approximately 30-76 days)
3. Advertises the RFP to an adequate number of qualified bidders willing and able to compete (approximately 14 days)
4. Proposal submittal deadline (no less than 14 days after program operator posts answers to bidders)
5. Evaluation of proposals (approximately 7 days)
6. Selection of proposal and award of contract (approximately 7 days)
7. Negotiates contract terms and submits for board approval (if applicable) (approximately 5 days)
8. Submits negotiated unsigned contract and all solicitation documents to CDE (approximately 19 days from proposal submittal deadline)
9. CDE review and approval of the negotiated contract (approximately 22 days)
10. Executes the CDE approved contract (approximately 7 days)
11. Submits copy of executed (signed) contract to CDE (approximately 7 days for final review and approval)
12. CDE reviews and approves executed (signed) contract or requests changes if executed contract differs from approved proposed contract (approximately 2 days for final review and approval)

Timeline is subject to change depending on factors including, but not limited to, the number of revisions needed.

The SFSCU Specialists will provide assistance and support throughout the solicitation and contract review and approval process. To ensure the required contract review and approval follows the above timeline, program operators need to plan to respond to the CDE requests for information or additional documents within three (3) business days of receipt.

Approval Process for Contract Amendments or Extensions

The CDE suggests that program operators adhere to the following steps for the approval process for contract amendments or extensions:

1. Develops and submits the proposed contract amendment or extension to the CDE
2. The CDE reviews and approves the amendment or extension. (Some editing may be necessary before the CDE is able to approve the proposed amendment or extension)
3. Execute the CDE-approved amendment or extension
4. Submits a copy of the executed amendment or extension to the CDE
5. The CDE reviews the signed amendment or extension. If the executed document differs from the CDE-approved document, the CDE will contact the program operator regarding the unapproved changes to the contract, and may withhold program reimbursement funds until the CDE approves the changes

Submission Deadlines

The following dates are for all proposed FSMC Contracts (new, rebids, and renewals) for school year 2025-26:

New and Rebid Proposal Submission Deadline: January 6^th, 2025

Renewal Proposal Submission Deadline: February 3^rd, 2025

New and rebid FSMC contracts must be reviewed and approved by the CDE prior to solicitation and execution. FSMC renewals must be reviewed and approved prior to execution.

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Noncompliance

• Overview
• Affect on Net Cash Resources

Overview

Federal regulations specify that school food authorities (SFA) may not use food service revenues (from the cafeteria fund) to pay for goods and services if the California Department of Education (CDE) determines that the SFA did not follow state and federal procurement procedures to obtain such services, or if the nature of the contract violates state or federal laws and regulations.

If the SFA or the contracted food service management company materially fails to comply with any term of the contract—stated in a state or federal statute or regulation, assurance, state plan or application, notice of award, or elsewhere—the CDE may take one or more of the following actions pursuant to Title 2, Code of Federal Regulations (2 CFR), Part 200.339:

1. Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity, or more severe enforcement action by the Federal awarding agency or pass-through entity (also refer to Title 7, Code of Federal Regulations [7 CFR], Section 210.24)
   
   
2. Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost for the activity or action not in compliance
   
   
3. Wholly or partially suspend or terminate the Federal award
   
   
4. Initiate suspension or debarment proceedings as authorized under 2 CFR Part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency)
   
   
5. Withhold further Federal awards for the project or program
   
   
6. Take other remedies that may be legally available
   

When the CDE notifies the SFA of noncompliance, the SFA can either rebid the contract following California state and federal procurement procedures and applicable California state law, or pay for the services provided under the contract with other funds. If the CDE notifies an SFA of noncompliance, and the SFA continues to use the services provided under the contract without proper rebidding, the SFA may not charge the cafeteria fund to pay for such services and the CDE may withhold program funds (7 CFR, Section 210.24).

Affect on Net Cash Resources

If an SFA continues to use services provided under an improperly procured contract and pays for these services with other funds, such as the general fund, the contract may continue. However, the lack of significant expenditures from the cafeteria fund may result in excess net cash resources (NCR).

Pursuant to 7 CFR, Section 210.14(b), SFAs are required to limit their cafeteria fund balance to an amount that does not exceed three-months’ average operating expenditures. Beginning July 1, 2022 the CDE has increased the NCR limitation to six months average operating expenditures. Federal regulations under 7 CFR, Section 210.19(a)(1), authorize the CDE to require an SFA with NCR over the federal limit to reduce the price children are charged for lunches or improve food quality, or the CDE can adjust the level of the SFA’s federal reimbursements until the NCR is at or below the allowed limit.

SFAs should avoid retaining improperly procured contracts, as doing so could affect the cafeteria fund.

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Resources and Tools

• Forms
• Manuals
• Resources
• Training
• Regulations
• Management Bulletins
• U.S. Department of Agriculture (USDA) School Meals Policy Memos

Forms

CDE Sample Request for Proposal and Model Contract

Sample Request for Proposal and Fixed-Price contract for school food authorities procuring the services of a food service management company. This document is now available in the Download Forms section of Child Nutrition Information & Payment System (CNIPS). The form number is PRU-07.

SFA Procurement Questionnaire

Procurement questionnaire to obtain specific SFA food service information and provide targeted technical assistance for soliciting the services of a food service management. This document is available in the Download Forms section of CNIPS. The form number is PRU-09.

Education Code Section 49554 Certification Form

School districts and county offices of education choosing to contract with a FSMC or private meal vendor must submit this form to the CDE and receive approval. This document is available in the Download Forms section of CNIPS. The form number is PRU-06.

Manuals

USDA Manual: Contracting with Food Service Management Companies: Guidance for School Food Authorities

Resources

Procurement Resources Unit Staff Contacts

Procurement Methods Quick Reference Table (XLSX)
This is a consolidated, at-a-glance table that compares the Child Nutrition Programs procurement methods and requirements.

2024–25 SFAs with FSMC Contracts List
This is a list of SFAs with FSMC contracts for the 2024-25 school year. In August, CDE emails notifications to SFAs with FSMC contracts due to expire or be extended. Follow-up reminders are sent in the following months. FSMC contract rebids follow the same approval timeline as new contracts. Please see Timeline to Obtain Approval from the CDE in the Approval tab. Vended meal contracts do not require CDE preapproval at this time.

Training

The Procurement Guidance Webinar Training series is designed to provide valuable procurement information for SFAs and local educational agencies (LEA), (FSMCs, meal vendors, and industry partners. The CDE strongly recommends SFAs and LEAs considering or soliciting food service contracts watch this entire Webinar series.

Part 1 - Introduction to Procurement
Introduces the Webinar series and provides an overview of the steps involved in procuring a food service contract.  

Part 2 - Developing a Scope of Work
Learn how to define key components in developing a scope of work.

Part 3a - Introduction to Formal Procurement
Learn when program operators must use the formal procurement method, identify the four principles of procurement, recognize when to use the different types of formal procurement methods, and learn the five steps in the formal procurement process in California.

Part 3b - Formal Procurement: Invitation for Bids
Understand when it is advantageous to use the Invitation for Bids (IFB) solicitation method to conduct a formal procurement; identify the five best practice steps for the formal procurement method using the IFB solicitation method, and learn how to properly execute each step in the formal procurement process using the IFB solicitation method.

Part 3c - Formal Procurement: Request for Proposals
Understand when it is advantageous to use the Request for Proposal (RFP) solicitation method to conduct a formal procurement, identify the five best practice steps for the formal procurement method using the RFP solicitation method, and learn how to properly execute each step in the formal procurement process using the RFP solicitation method.

Part 4 - Informal Procurement Methods for School Nutrition Programs
Provides an overview of informal procurement methods, the thresholds for each method, applicable state laws, and how to properly procure goods and services using these informal methods.

Part 5 - Vended Meal Contracts: Meal Patterns
Presents an overview of the USDA meal pattern requirements for the National School Lunch Program and School Breakfast Program, and what steps to take to ensure contractors comply with program requirements.

Part 6 - USDA Foods: Food Service Management Companies and Vended Meal Contracts
Explains the basics of USDA Foods and Food Distribution Program participation, how to ensure that FSMCs and/or meal vendors properly use USDA Foods, and the development of bid and contract language for the inclusion of USDA Foods.

Part 7 - Buy American Provision for School Nutrition Program
Provides guidance on the Buy American Provision requirements, the two limited exceptions, implementation of the provision, and monitoring by the CDE.

To access the webinar series, visit Procurement Guidance Training Series.

Regulations

Federal

Electronic Code of Federal Regulations (CFR), Title 7 (Agriculture)

• Part 210, National School Lunch Program
• Part 220, School Breakfast Program
• Section 226.21, Food Service Management Companies

USDA Food and Nutrition Service

SP 40-2016 Updated Guidance: Contracting with Food Service Management Companies
The updated guidance includes information on appropriate procurement methods, considerations when using prototype solicitations, the process of evaluating and scoring criteria for contract awards, and monitoring responsibilities.

State

California Education Code

• Applicable sections include: 38103, 45103, 45103.1, 45103.5, and 49554

Management Bulletins

The following Management Bulletins are available on the California Department of Education School Nutrition Programs (SNP) Management Bulletins Web Page:

• CNP-01-2024, January 2024, Federal Micropurchase & Small Purchase Thresholds
• SNP-05-2023, March 2023, Food Service Mgmt. Company Contract Preapproval
  
• SNP-09-2018, September 2018: Distinguishing a Food Service Management Company From a Meal Vendor and Procurement Requirements Overview
  
• SNP-13-2015, January 2015, Procuring and Monitoring of FSMC Contracts
  
• USDA-SNP-30-2012, October 2012: Reminder – Compliance with Procurement Requirements

Cafeteria Fund Guidance
Provides Local Educational Authorities (LEA) with information and instructions pertaining to federal and State statutes and regulations that govern school cafeteria funds.

USDA School Meals Policy Memos

Other School Meal Policy Memos issued by the USDA are available on the USDA Food and Nutrition Service Documents & Resources web page :

• USDA Policy Memo SP 24-2024, CACFP 10-2024, SFSP 14-2024 , June 2024: Geographic Preference Option QA Memo
• USDA Policy Memo SP 23-2024 , May 2024: Buy American Provisions Related to the Final Rule Titled, Child Nutrition Programs: Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans
• USDA Policy Memo SP 22-2024, CACFP 08-2024, SFSP 13-2024 , May 2024: Geographic Preference Expansion Related to the Final Rule titled, Child Nutrition Programs: Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans
• USDA Policy Memo SP 19-2024, CACFP 07-2024, SFSP 12-2024 , May 2024: Initial Implementation Memorandum: Child Nutrition Programs - Meal Patterns Consistent With the 2020-2025 Dietary Guidelines for Americans
• USDA Policy Memo SP 21-2023, CACFP 10-2023, SFSP 12-2023 , August 2023: Initial Implementation Memo: Child Nutrition Program Integrity Final Rule
  
• USDA Policy Memo SP 40-2016, CACFP 12-2016, SFSP 14-2016, Updated Guidance: Contracting with Food Service Management Companies
• USDA Policy Memo SP 09-2015, CACFP 03-2015, SFSP 02-2015, Written Codes of Conduct and Performance of Employees Engaged in Award and Administration of Contracts
• USDA Policy Memo SP 35-2013, April 2013: State Agency Oversight and Monitoring of School Food Authority Contracts with Food Service Management Companies
• USDA Policy Memo SP 23-2013, February 2013: Guidance Reaffirming the Requirement that State Agencies and School Food Authorities Periodically Review Food Service Management Company Cost Reimbursable Contracts and Contracts Associated with USDA Foods

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