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Child Nutrition Program Purchasing Regulations and Processes Distance Education Workshop February 5, 2009 Wanda Shocke

Child Nutrition Program Purchasing Regulations and Processes Distance Education Workshop February 5, 2009 Wanda Shockey, MEd, RD, LD. Major Topics . State Regulations Federal Procurement Regulations – Newest! Conflict in Ethics Regulations Purchasing Cooperatives Contracts

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Child Nutrition Program Purchasing Regulations and Processes Distance Education Workshop February 5, 2009 Wanda Shocke

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  1. Child Nutrition Program Purchasing Regulations and ProcessesDistance Education WorkshopFebruary 5, 2009Wanda Shockey, MEd, RD, LD

  2. Major Topics • State Regulations • Federal Procurement Regulations – Newest! • Conflict in Ethics Regulations • Purchasing Cooperatives • Contracts • Informal Purchases – Quotes • Formal Purchases – Bids

  3. Arkansas Procurement Laws & Regulations

  4. Arkansas Regulations & Ethics for Child Nutrition Programs Arkansas State Regulations Specific to Education Entities: • 6-21-301 Definitions • 6-21-304 Manner of Making Purchases • 6-21-603 Interest in Certain Contracts Unlawful- Exception • 6-21-601 School Officials Prohibited From Having Interest in Sales of School Supplies • 6-24-101- Act 1599 of 2001 Disclosure of Relationships with Vendors or Potential Vendors

  5. Arkansas Code: 6-21-301 Definitions • (1) Commodities-all supplies, goods, material, equipment, services • (2) Open market purchases- purchases which do not require competitive bids • (3) Purchases- acquisition of commodities • (4)Purchases price- full sale or bid price • (5)Purchasingofficial-designated agent of the district authorized to contract for the district

  6. Arkansas Code: 6-21-304 Manner of Making Purchases State Requirements • (a)(1) Bids (Formal) are required for purchases of $10,000 or more • (a)(2) Open (Informal) market purchases may be made if less than$10,000 • (a)(3) Commodities (Purchased Goods) can NOT be split as a purchase to prevent required bidding

  7. School Districts • For Formal Bidding, as a minimum, districts must follow state regulations ? or federal regulations ? or local regulations ? State - $ 10,000 Federal - $ 100,000 Local District - $ 5,000 (Varies by individual district) 1995 Arkansas Attorney General’s Opinion SPECIFIC to SCHOOL FOOD SERVICE Requires formal bids with aggregate of $5,000 or more. Which is MOST Strict $$$$$$$ ???

  8. Arkansas Code: 6-21-305 Exemptions From Bidding Requirement • (a)(1)(A)Emergency (Requires Documentation) • (a)(1)(B) Superintendent must attach description of emergency to purchase order • (a)(2) Only available from the federal government • (a)(3) Utility services • (a)(4)Used equipment • (a)(5)Single source (Be careful to document justification) • (b) All exemptions require a written explanation attached to purchase order

  9. Arkansas Code: 6-21-601 School Officials Prohibited From Having Interest in Sales of School Supplies • (a) Unlawful for anyone with authority over purchases in schools to have any interest in the sale of a commodity (Purchased Goods). • (b) Unlawful for person to receive a reward or pay for influencing the purchase of a commodity (Purchased Goods). See Stronger Legislation and Rules for Act 1599 of 2001

  10. Arkansas Code 6-21-601 School Officials Prohibited From Having Interest in Sales of School Supplies • (c-d) Unlawful for anyone with responsibility of purchasing to receive anything of monetary value or to share the reward with any other person with authority over purchases. http://arkansased.org/rules/pdf/current/ade_209_ethical_guidelines_rules.pdf (e) Anyone convicted shall be fined and shall be removed from office.

  11. Arkansas Code 6-21-603 Interest in Certain Contracts Unlawful- Exception • (a) Unlawful for board member to have interest in any purchase over $500. • (b) Shall not apply on purchases made using open competitive bid and let to the lowest bidder. (But now have Act 1599 !!!)

  12. ADE Ethics Rules and Regulations • “RULES AND REGULATIONS GOVERNINGETHICAL GUIDELINES AND PROHIBITIONSFOR EDUCATIONAL ADMINISTRATORS, EMPLOYEES, BOARD MEMBERS AND OTHER PARTIES” • Ark. Code Ann. §§6-11-105, 6-24-101 http://arkansased.org/rules/rules_current.html

  13. 3.00 DEFINITIONS • 3.01 “Administrator” means • any superintendent, • assistant superintendent or his/her equivalent, • school district treasurer, • business manager, or • other individual responsible for entity-wide purchasing. The determining factor for being considered an “administrator” for the purposes of these regulations and compliance with Act 1599 of 2001 is the actual or implied authority of an individual to make purchases on behalf of the entire organization. This definition excludes many building principals (whose purchasing authority is often limited to their own school), but could include athletic directors or others. Classified employees serving in food services, business/accounting or other capacities may also be considered “administrators” under Act 1599 when they exercise autonomous system-wide purchasing authority.”

  14. State Ethic Rules VIOLATE Federal Ethics • Arkansas Ethics Rules • 15.00 REGISTRATION, TRAVEL, CONVENTIONS AND SEMINARS • 15.01 Board members, administrators (food service) and employees of a public educational entity are prohibited from receiving any payment or reimbursement from a vendor for any registration, travel, lodging, food, entertainment or other expenses not directly associated with an educational interest or business interest of the public educational entity. VIOLATION OF FEDERAL REGULATIONS FOR ADMINISTRATORS INVOLVED IN PURCHASING FOR CHILD NUTRITION PROGRAMS. • 15.02 Board members, administrators and employees of a public educational entity are prohibited from receiving any trip or attending any convention or seminar which is paid for by a vendor when the purpose for the trip or attendance at the convention or seminar is not directly associated to an educational interest or business interest of the public educational entity. VIOLATION OF FEDERAL REGULATIONS FOR ADMINISTRATORS INVOLVED IN PURCHASING FOR CHILD NUTRITION PROGRAMS.

  15. Why are these violations? • Arkansas rules are stating vendors can pay for registration, travel, conventions and seminars if these are educationally related. • Federal Regulations: 7 CFR Part 3016.36 (b) (3) (iv) This regulation states: "…employees…will neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, potential contractors, or parties….“

  16. MAJOR Rule • The most restrictive regulations must be used when determining the procurement method to be used when federal funds will pay for the items to be procured. • For example: If the local school district policy is more restrictive than the state and federal regulations, all procurement with federal dollars must follow the local school district policy/regulation.

  17. MAJOR Rule • Open and Free Competition Competitive Prices are Best for Child Nutrition Programs • Do NOT Restrict Competition via specifications, timelines or material changes after the bid period.

  18. Close Your Eyes and Breathe!!!

  19. You CAN Meet the Challenges!!!

  20. Child Nutrition Program Purchasing Regulations and ProcessesPart 2 – Federal Procurement Laws and Regulations Distance Education WorkshopFebruary 5, 2009Wanda Shockey, MEd, RD, LD

  21. Federal Procurement Laws & Regulations

  22. Federal Regulations & Ethics for Child Nutrition Programs • 7 CFR Part 210 – School Lunches • 7 CFR Part 220 – School Breakfast • 7 CFR Part 3015 - Procurement • 7 CFR Part 3016 - Procurement • OMB CIRCULAR A-87

  23. Open and free competition Prohibited practices Written procedures Award criteria Available methods Code of conduct Affirmative contracting Prohibited costing methods Recordkeeping Contract termination Access to records Contract administration Certifications and clauses Federal Regulations Apply to:

  24. KEY POINTS • 7 CFR Part 3015 & 3016 • Available methods • Code of conduct • Affirmative contracting • Prohibited costing methods • Recordkeeping • Contract termination • Access to records • Contract administration • Certifications and clauses

  25. KEY POINTS • Main Difference • Between 3015 & 3016 • 7CFR 3016 has procurement: • Suspension & Debarment Regulations

  26. Differences in Small Purchase Threshold • Part 3015 Less than $10,000 • Part 3016 • Less than $100,000 • Local public agencies/School Districts: Lower threshold of State, District or Federal Requirement

  27. Anti-competitive Practices • Revised A-110 Provision: To eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, invitations for bid and/or requests for proposals shall be EXCLUDED from competing for such procurements

  28. Vendor or ManufacturerCannot Develop Bid Specifications • 7 CFR Part 3016.60(b) prohibits awarding contracts to any entity that develops or drafts specifications, requirements, statements of work, invitations for bids, requests for proposals, contract terms and conditions or other procurement documents. • While schools have broad discretion in gathering information for use in connection with procurements, information from potential bidders must be appropriately modified to develop tailored specifications, otherwise these bidders must be excluded from competing for such procurements. • Any action which diminishes open and free competition seriously undermines the integrity of the procurement process and may subject the SFA to bid protests.

  29. Escalation/De-escalator Clause • Provision in a contract for increasing or decreasing the contracted price for labor, raw food,material, etc., in step with the market prices or an agreed upon benchmark such as consumer price index (CPI). • Contract management responsibility of SFA/District REQUIRES monitoring and application of the de-escalation (price-reduction) clause as well as the escalator clause.

  30. Selection Procedures 7 CFR Part 3016.36 (c) (3)(i)The request for proposal (RFP) or invitation to bid shall: "incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not… contain features, which unduly restrict competition." • 7 CFR Part 3016.36 (c) (3) (ii)The RFP or invitation to bid shall: "Identify all requirements which offerors (vendors) must fulfill and all other factors to be used in evaluating bids or proposals."

  31. Protest Procedures • Pursuant to 7 CFR 3016.36(b)(12), SFAs/Districts must have protest procedures in place to handle and resolve disputes relating to their procurements and must in all instances disclose information regarding a protest to their State agency.

  32. Code of Conduct – 7 CFR 3016 • 7 CFR Part 3016.36 (b) (3) A School Food Authority (local school district) “will maintain a written code of conduct governing the performance of their (SFA) employees engaged in the award and administration of the contract. No employee …shall participate in selection or in the award or administration of a contract supported by Federal fundsif a conflict or interest, real or apparent would be involved.“ • 7 CFR Part 3016.36 (b) (3) (iv) This regulation states: "…employees…will neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, potential contractors, or parties….“

  33. Contract Management MATERIAL CHANGE TO A BID AWARD OR CONTRACT A material change can be thought of as a change made to a contract after it has been awarded that alters the terms and conditions of that contract substantially enough, to the extent that had other bidders known of these changes in advance, they could have bid differently and more competitively.

  34. Access to Contractor Records • 7 CFR Parts 3016.36 (i) (10) "Access by the grantee (state agency), the Federal grantor agency (USDA), the Comptroller General of the United States, or any of their duly authorized representatives to any books, documents, papers, and records of the contractor which are directly pertinent to that specific contract for the purpose of making audit, examination, excerpts, and transcriptions.” • 7 CFR 3016.36 (i) (11)Regulations require “ retention of all required records for three years after … the final payments and all other pending matters are closed.” Arkansas Law requires 5 years from final transaction!!

  35. Newest Federal Procurement Changes Revisions to Federal Procurement Regulations for Child Nutrition: Formal Announcement by USDA 1/28/08 FINAL RULE effective November 30, 2007 Clarifications began July 2008 and are continuing:

  36. Major Changes in Final Procurement Rule: • The rule explicitly: • (1) limits an SFA’s use of nonprofit school food service account funds to costs resulting from proper procurements and contracts; (Violations of Procurement Regulations --- can not pay for purchases out of school nutrition programs) • (2) requiresthat allowable costs paid from the nonprofit school food service account be net of all discounts, rebates, and applicable credits; and • (3) requires State agencies to review and approve SFA procurements of food service management companies’ services in advance of contract execution.

  37. State Agency Responsibilities • New Regulations 7 CFR 210. 21 Subpart E. (c) (1) More Clearly Define the State Agency Responsibilities to: • ADE, CNU may impose a pre-issuance review on a school food authority (SFA) proposed procurement. • The SFA must make available, upon request by the state agency, its procurement documents, including but not limited to solicitation documents, specifications, evaluation criteria, procurement procedures, proposed contracts, and contract terms. • SFA shall comply with State Agency requests for changes to procurement procedures and solicitation and contract documents to ensure that, to the State agency’s satisfaction, such procedures and documents reflect applicable procurement and contract requirements and the requirements of this part.

  38. State Agency Responsibilities 7 CFR 210. 21 Subpart E. (c) (2) and (3): (2) Prototype solicitation documents and contracts. The SFA must obtain state agency’s prior approval for any change made to prototype solicitation or contract documents before issuingthe revised solicitation documents or execution of the revised contract. (3) Prohibited Expenditures. No expenditure may be made from the nonprofit school food service account for any cost resulting from a procurement failing to meet the requirements of this part.

  39. Federal References on CNU Website: • January 23, 2009 USDA  Economic Price Adjustments in Vendor Contracts - SP-10-2009  http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_10-2009_os.pdf 2. January 15, 2009 USDA Competitive Procurement and Private Grants for School Food Programhttp://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_09-2009_os.pdf • January 9, 2009 Procurement Questions http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2009/SP_08-2009_os.pdf Special Note: Southwest Region Office Released 1/16/09 as 2009-SP-11 4. July 9, 2008 USDA Applying Geographic Preferences in Procurements for the Child Nutrition Programs http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2008/SP_30-2008.pdf • July 1, 2008 USDA CN Labeling Process and Applicationhttp://www.fns.usda.gov/cnd/CNlabeling/default.htm • January 28, 2008( Effective Nov. 30, 2007)Final Rule, Procurement Requirements for the National School Lunch, School Breakfast and Special Milk Programs http://www.fns.usda.gov/cnd/Governance/Policy-Memos/2008/SP_09-2008-OS.pdf

  40. Past Federal Rule for Non-geographic Preference • 7 CFR Part 3016.36 (c) (2)A School Food Authority (local school district) “will conduct procurements in a manner that prohibits the use of statutorily or administratively imposed in-State or local geographical preferences in the evaluation of bids or proposals…” Slightly changed by US Farm Bill 2008

  41. Farm Bill Change: FNS guidance (USDA Memo SP-08-2009, Procurement Questions, See Answer to Question #2: • New flexibility for application of “Geographic Preference may only be applied to the procurement of unprocessed agricultural products which are locally grown and locally raised, and that have not beencooked, seasoned, frozen, canned, or combined with any other products.”

  42. Joint Explanatory Statement in Farm Bill to Support Local Farmers • Farm Bill legislation states “that de minimis handling and preparation might be necessary to present an agricultural product to a school food authority in a useable form, such as washing vegetables, bagging greens, butchering livestock and poultry, pasteurizing milk, and putting eggs in a carton.”

  43. Farm Bill Change to Geographic Preference Federal Law Takes Precedent over State Law • 2008 Farm Bill states that school districts can: • Elect to apply geographic preference for ONLY locally produced farm products that are minimally processed. (Local District Option) • Define the term “locally produced” at district discretion, but cannot limit competition by choice of definition. (Local Option) • Not apply preference to locally produced foods that are chopped, cut, diced or sliced products. Reference: USDA Memo 2009-SP-11(January 9, 2009)

  44. Procurement Fees • “Any fee (including a procurement fee) that is directly tied to the amount of discounts, rebates, and applicable credits to be returned to the SFA is an unallowable non-profit school food service account cost ….” • Source: USDA Memo SP-15-2008

  45. Procurement Fees – cont… • “A fee structured in this way is clearly intended to return some or all of the discounts, rebates, and applicable credits to the company with whom the SFA has contracted for services rather than to ensure that they accrue to the non-profit school food service account.” • This is true whether the fee is set forth in the solicitation/contract or not. • Source: USDA Memo SP-15-2008

  46. Fixed Procurement Fees • The procurement fee could be a separate fee or part of another contract fee, as long as it remains fixed.

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