California Department of Agriculture Continuing Education Approval Request Section G

The tabs below provide guidance and information for school food authorities (SFA) on soliciting bids and contracting using funds from the nonprofit school food account. Subtopics under the tabs below include free and open competition, informal and formal procurement, bid thresholds, the California Department of Education (CDE) review and approval process, and other topics relevant to the food service operation and contracting requirements.

For procurement information on all Child Nutrition Programs (CNP), visit the Procurement in CNPs web page.

For assistance with the procurement process or for related questions, SFAs can contact the Procurement Resources Unit (PRU) by phone at 916-322-8323. Send questions or documents by email to the PRU at SFSCONTRACTS@cde.ca.gov.

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 (7CFR), 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. SFAs must conduct either a formal or an informal bidding process.

According to Title 2, Code of Federal Regulations (2 CFR), Part 200.319(a), 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 into a contract prepared by a bidder. Federal regulations in 2 CFR, Part 200.319(a), 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, Section 20112.

Buy American Provision

Introduction

The William F. Goodling Child Nutrition Reauthorization Act of 1998 added a provision, Section 12(n) to the National School Lunch Act (NSLA) (Title 42 United States Code [U.S.C.]) requiring school food authorities (SFA) to purchase, to the maximum extent practicable, domestic agricultural commodity products. The Buy American Provision supports the mission of Child Nutrition Programs (CNP), which is to serve children nutritious meals in schools and support American agriculture. Using food products from local sources supports local farmers and continues to provide healthy choices for children in the school meal programs while supporting the local economy. The Buy American Provision also supports SFAs working with local, or small, minority, and women-owned businesses as required by Title 2, Code of Federal Regulations (2 CFR), Section 200.321. SFAs are encouraged to purchase food products from local and regional sources when expanding farm to school efforts.

SFAs are reminded that when funds are used from the nonprofit school food service account (cafeteria fund), procurement transactions for food products on the commercial market must comply with the Buy American Provision (Title 7, Code of Federal Regulations [7 CFR], sections 210.21[d] and 220.16[d]), whether food products are purchased by SFAs or entities that are purchasing on their behalf. Some examples of entities purchasing on the behalf of SFAs include food service management companies, group purchasing organizations, cooperatives, agents, third-party services, and interagency or intergovernmental agreements.

For additional information on the Buy American Provision, please see USDA Policy Memo SP-38-2017, Compliance with and Enforcement of the Buy American Provision in the National School Lunch Program on the USDA Food and Nutrition Service Documents & Resources web page .

Buy American Provision Requirements

To ensure food products meet the Buy American Provision requirements, the U.S. Department of Agriculture (USDA) Food and Nutrition Service (FNS) requires SFAs to include the Buy American Provision requirement in documented procurement procedures, all School Nutrition Programs (SNP) procurement solicitations and contracts (including domestic requirements in bid specifications, contract monitoring and verifying cost and availability of domestic and nondomestic foods), and retain records for documenting any exceptions. All responsive and responsible bidders must acknowledge and agree to comply with the Buy American Provision requirements.

SFAs that receive any federal reimbursement through the SNP are required to adhere to the Buy American Provision by purchasing to the maximum extent practicable, domestic commodity, or product. This includes SNPs that also operate a Child and Adult Care Food Program or a Summer Food Service Program. The NSLA defines domestic commodity or product as an agricultural commodity that is produced in the United States and a food product that is processed in the United States using substantial agricultural commodities that are produced in the United States. Substantial means that over 51 percent of the final processed product consists of agricultural commodities that were grown domestically. Products from Guam, American Samoa, Virgin Islands, Puerto Rico, and the Northern Mariana Islands are allowed under this provision as territories of the United States.

For products procured by the SFA for use in the CNPs and purchased with cafeteria funds, the food component is considered the agricultural commodity. The USDA FNS defines food component as any of the food groups that comprise reimbursable meals.

The food components are:

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

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 USDA Policy Memo SP-32-2019, Buy American and the Agriculture Improvement Act of 2018 on the USDA Food and Nutrition Service Documents & Resources web page .

U.S. Department of Agriculture 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

There are limited exceptions to the Buy American Provision requirements that allow for the purchase of products not meeting the domestic commodity or product standard in situations when the use of domestic foods is truly not practicable.

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 .

It is up to the SFA to determine, based on their responses to the questions listed above, if they are able to justify one of the exceptions to the Buy American Provision requirements.

The two limited exceptions to the Buy American Provision requirements that an SFA can use are:

• The product is not produced or manufactured in the United States in sufficient and reasonably available quantities of a satisfactory quality
• Competitive bids reveal the costs of a United States product are significantly higher than the nondomestic product (it should be recognized that the FNS has given guidance in Policy Memo SP 38-2017; it is the SFA's responsibility to determine the threshold)

If an SFA is using one of the above exceptions, there is no requirement to request a waiver from the California Department of Education (CDE) in order to purchase a nondomestic product. SFAs must, however, keep documentation that justifies any exception(s).

The USDA and CDE recognize that some agricultural commodities cannot typically be purchased or produced in sufficient quantities and quality in the United States. Examples include:

• Bananas
• Pineapple
• Mango
• Jicama

The Buy American Provision is not intended to prohibit the continued purchasing of these nutritious foods.

Monitoring the Buy American Provision by School Food Authorities

Monitoring and enforcing the compliance of the Buy American Provision by the SFA and oversight by the CDE are critical functions. SFAs must monitor contractor performance as required in 2 CFR, Section 200.318(b), to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.

The SFA can accomplish this by:

• Ensuring the solicitation and contract language includes the Buy American Provision (required)
  • Include language in the solicitation and contract that requires the vendor to notify the SFA prior to shipping a non-Buy American Provision compliant product
  • Include language in the solicitation and the contract that requires the vendor to provide the following:
    • Substitute product of equivalent or higher value at no cost to the SFA
    • Documentation that supports the noncompliant product in the shipment meets one of the limited exceptions as stated in USDA Policy Memo SP 38-2017
• Including the Buy American Provision requirement in its documented procurement procedures (required)
• Retaining records documenting any exceptions to the Buy American Provision (required)
• Requesting specific information from the supplier about the percentage of United States content in any processed end product
• Including in the SFA's written procurement procedures a requirement that the vendor certify the domestic percentage of the agricultural food component of commodities and products
• Managing the contract (all actions are required):
  • Monitoring the vendor's compliance with the terms of the contract or purchase order
  • Reviewing products and delivery invoices or receipts to ensure the domestic food that was solicited and awarded is the food that is received
  • Conducting periodic reviews of storage facilities, freezers, refrigerators, dry storage, and warehouses to ensure the products received comply with the Buy American Provision

Monitoring of the Buy American Provision by the California Department of Education

Onsite Administrative Review

As part of the SNP Administrative Review (AR), the CDE will evaluate compliance with the Buy American Provision by randomly selecting and reviewing food and beverage (excluding bottled water) labels from each of the food component categories listed below:

• Bakery, pasta, and miscellaneous components, such as grain components delivered ready to serve; and wheat flour, cornmeal, or other grain flours, used to prepare grain components such as pasta, bread, etc.
• Canned fruit and fruit juice
• Canned vegetables and vegetable juice
• Frozen fruit and fruit juice
• Frozen vegetables and vegetable juice
• Frozen meat and entrée items
• Refrigerated foods such as produce, dairy, and food components that may be thawing for future meal service

The number of food labels reviewed depends on the location of the on-site and off-site food storage facilities. If the SFA stores a majority of commercial food products at the site(s) selected for review, then the CDE will review a minimum of two items in each of the food categories at the on-site food storage facility. If the SFA stores a majority of commercial food products at an off-site food storage facility at the site(s) selected for review, then the CDE will review a minimum of two items in each of the food categories at the off-site food storage facility. If the SFA uses a combination of on-site and off-site food storage options, the CDE will review at least one item in each of the food categories at the on-site food storage facility and at the off-site food storage facilities.

The SFA is compliant with the Buy American Provision requirements if the review of food and beverage labels does not identify any nondomestic food or processed food products or if documentation exists to support an exception to the Buy American Provision requirements as outlined in the USDA Policy Memo SP 38-2017. If the SFA has nondomestic agricultural food components and lacks documentation to support exceptions to the requirement, the CDE must issue a finding and require corrective action.

Corrective action or technical assistance resulting from an on-site SNP AR may require the SFA to:

• Require the review of food deliveries for contractor compliance
• Monitor to ensure the correct domestic food components contracted for are delivered
• Prior to accepting foods, ensure that an alternative domestic food component, or an exception to purchase nondomestic foods, has been approved for delivery
• Develop policies and procedures for monitoring and ensuring compliance with the Buy American Provision
• Repay the cafeteria fund from an allowable nonfederal funding source for repeat or egregious findings; this will be determined by the CDE on a case-by-case basis and with approval by the appropriate FNS regional office.

If the agricultural food component's packaging does not identify its origin at all, or in the case of processed foods that its agricultural food components are 51 percent domestic by weight or volume, the SFA may be out of compliance if an exception for nondomestic agricultural commodities was not first approved and documented by the SFA.

For additional questions and answers on the Buy American Provision compliance and CDE monitoring, please see USDA Policy Memo SP-38-2017.

Offsite Local Agency Procurement Review

As part of the local agency procurement review, the CDE must ensure SFA compliance with the Buy American Provision requirements. During a procurement review, the CDE will:

• Determine if SFAs are purchasing domestic commodities as defined in 7 CFR, sections 210.21(d) and 220.16(d)
• Verify that solicitations and contracts contain the Buy American Provision certification language
• 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 noncompliant with the Buy American Provision, the CDE must issue a finding and require corrective action that 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
• Fiscal action for repeat or egregious findings, on a case-by-case basis, with approval by the appropriate FNS regional office

Request for RFP or IFB

RFPs, also known as competitive proposals (2 CFR, Part 200.320(d)), 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 an food service management company (FSMC) should use the RFP method of procurement.

IFBs, also known as competitive sealed bids, 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. Evaluating which types of services are needed and preparing a Scope of Work (SOW) that describes the services and tasks or products requested
2. Drafting the RFP/IFB, which must include the SOW and a sample contract
3. Submitting the RFP/IFB to the CDE for review and approval prior to publishing (SFAs should allow 90 days for the CDE to review and approve)
4. Providing the RFP/IFB to contractors known to offer the desired services or products
5. Publicly advertising the RFP/IFB
6. Establishing a date and time for opening proposals/bids
7. Evaluating the proposals/bids
8. Submitting the negotiated contract and all bidding documents to the CDE for review and approval (allow 30 days); this is not required for an IFB procurement
9. Awarding the contract and publicly posting the outcome of the RFP/IFB

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 PRU 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 PRU by email at SFSCONTRACTS@cde.ca.gov, or by fax at 916-322-3749.

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 a minimum of three price quotes. SFAs may not bypass the competitive bidding process by entering into 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, decision tree, policies, resources,and 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.

In addition, the RFP and Contract Checklist, available on CNIPS Download Forms, Form ID PRU-05, is a useful tool to ensure that all required federal and state regulations are included in your contract.

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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

Effective January 1, 2018, Senate Bill 544, Contracting for Purchases for the Child Nutrition Programs (Chapter 395, Statutes of 2017) amends the California Public Contract Code, Section 20111. The result of this amendment is that public school districts (PSD) and county offices of education (COE) are permitted to follow the federal small purchase threshold of $150,000, unless your local small purchase threshold is more restrictive. Additionally, PSDs and COEs can award competitive proposal procurements (Title 2, Code of Federal Regulations, Section 200.320[d]) to the most responsive and responsible party, where price is the primary consideration, but not the only determining factor. In addition, the current informal purchase threshold for school districts and county offices of education is now the federal amount of $150,000. As always, program operators are required to use the most restrictive threshold for the procurement method being used.

On June 20, 2018, the Office of Management and Budget issued Policy Memorandum M-18-18 implementing new thresholds for micropurchase and small purchases under the Uniform Grant Guidance. The CDE implemented the new federal thresholds effective August 1, 2018. The federal micropurchase threshold increased to $50,000, and the federal small purchase threshold increased to $250,000.

SFAs must adhere to the applicable bid threshold established by their governing body:

Nonprofit agencies and charter schools must use the federal small purchase threshold.
Local governments, such as those administered by county government offices, must use the small purchase threshold established by their governing body or the federal threshold of $250,000, if no local threshold exists.

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(c)]

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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, 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 USDA 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(7CFR), 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 (7CFR, 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 PRU 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

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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 200.338:

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 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. 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 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.

EC 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

2021–22 FSMC Contract Rebids Due
This is a list of SFAs due to rebid their FSMC contracts for the 2021–22 school year. In August, CDE emails expiration letter notifications to SFAs with expiring FSMC contracts, with follow-up reminders in October. 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 school food authorities (SFA) and local educational agencies (LEA), food service management companies (FSMC), 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 (Video; 24:46)
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 (Video; 29:42)
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. After viewing this training, program operators may print a certificate of completion (DOC).

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. After viewing this training, program operators may print a certificate of completion (DOC).

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. After viewing this training, program operators may print a certificate of completion (DOC).

Part 4 - Informal Procurement Methods for School Nutrition Programs (Under construction)
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 (Video; 36:54)
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 (Video; 17:35)
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 (Video; 25:23)
Provides guidance on the Buy American Provision requirements, the two limited exceptions, implementation of the provision, and monitoring by the CDE.

Regulations

Federal

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

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-01-2018, January 2018, Senate Bill 544 (McGuire) - State Small Purchase Threshold Amount
• 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
• SNP-10-2014, November 2014, Food Service Management Company Contract Preapproval
• 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 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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Source: https://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp

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