Vendor Relationships

Overview

You will need to establish working relationships with your vendors in order to secure the ingredients that you need. Be an informed buyer. Know your history, your menus, your specifications, and the volume. Do your research to understand pricing indexes and talk to your colleagues about their vendor experiences.

The federal government requires school district procurement practices to be fair, open, and competitive. The USDA Procurement Regulations are specific for each program: lunch 7 CFR 210.21, breakfast 7 CFR 220.16, summer 7 CFR 225.17, and CACFP 7 CFR 226.22. A detailed discussion relative to school food procurement is covered fully in the National Food Service Management’s, “Procurement in the 21st Century.” Specific to local foods procurement and also providing very clear and understandable explanations for school food procurement procedures is the new offering from the USDA Farm to School team, the thorough guide, “Procuring Local Foods for Child Nutrition Programs,” which takes you step by step through including Local and Regional Procurement in your plan. In addition to federal regulations, state and local guidance must also be understood in order for you to plan your procurement for all areas of your program. Common to all procurement methodology is ensuring competition is fair and unrestrictive. 

Informal Procurement Process

The small purchase threshold is an excellent example of non-federal regulations that affect your procurement. Though the federal small purchase threshold is $150,000, this is often not the case for districts where the threshold may be determined by state or local regulation. When the thresholds differ, you must follow whichever one is the most restrictive. The small purchase threshold is your “dollar amount” indication of when you must use a formal vs. informal procurement method. Informal procurement is no less competitive, but it is a less complicated process. The basic process includes:

  • Establishing the product specifications—this may include required ingredient profile, size dimensions, weight, frozen or fresh, freshness (production to delivery)
  • Identifying the requirements of the district, which usually includes your volume need, delivery requirements, and frequency
  • Contacting prospective vendors with your intent to purchase products
  • Obtaining price quotes from at least three vendors
  • Documenting the procurement process in a procurement log
  • Awarding the bid to the most responsive bidder with the lowest price
  • Monitoring invoices and products to insure that bid is being honored

For each procurement process you should track and save a record of the activity—both your preparations and the responses—as your procedures will be reviewed by the state when you have your Consolidated Review Effort (CRE). Your knowledge of approximately how much of your budget may be allocated to a particular product or area of procurement will inform whether the informal process is appropriate.

It is important to note that you may not split up purchases for the single intent of falling below the small purchase threshold (see page 64 of the USDA's guide on Procuring Local Foods for Child Nutrition Programs for scenarios and explanation). But there are situations where splitting procurement makes sense, particularly along product types. Bread and dairy are two of the most common examples of intentional procurement splits. Another reason to create a separate procurement process would be for specific programs that may share products, but have separate and distinct needs. Fresh fruit and vegetable programs are a good example of this. More commonly, small purchase threshold procurement is focused around products that may have a unique source in lower volumes, for example, lettuce mix procured from local farm sources.

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Formal Procurement Process

There are two primary forms of formal procurement, Invitation to Bid (IFB) and Request for Proposal (RFP). Both processes share some similarities with regard to development, but the primary difference is the IFB is determined solely on lowest bid price, while the RFP is determined on more than price alone. The IFB process is typically used for purchasing a common food product with a detailed uniform specification that will command a large enough group of responders that price can be the only determining factor for the bid award. Large districts that have sufficient procurement expertise may solicit multiple IFPs for a single product, like apples or milk, which are common mainstays of the school meal program. For districts that may not be located in an area with numerous distributors, be it “broad line” (national distributors that carry everything, usually in excess of 4,000 products), dairy, produce, or other specialty distributors, they will most likely be developing an RFP. The process is still competitive but it is based on factors in addition to the price, like experience, ability to deliver to multiple sites, technical expertise, etc. The RFP process includes some negotiation once the proposals are submitted whereas the IFP has no negotiation.

In both processes the award is presented to the responder with the best overall value. The primary difference between the two is that the IFB is strictly identifying the lowest price from the most responsible and responsive bidder. In the case of the RFP, receiving the proposals is just the first step since evaluation and negotiation will need to occur before the award can be presented. The RFP can be outlined as a two-step process that asks the responder to first explain how they will achieve the request, and then show the costs in a second response. Evaluating the RFPs requires expertise in the product area as well as contracts. Evaluating the RFP objectively is very important. The two-step RFP allows a clear way to identify responders that may suit your requirement by evaluating the technical response, allowing you to rank them prior to evaluating the cost side of the RFP. Keep in mind, it’s important to develop a scoring method that does not give too much weight to price over technical expertise, otherwise it becomes a low-bid award.

Sample scoring metric excerpted from Procurement in the 21st Century, NFSMI 2013

For districts shifting their models from ready-to-heat foods to scratch-cooked, the RFP process is the most common choice for formal procurement because it allows the district to define requirements that meet their vision. This may include geographic preference protocol, or details provided on the invoices like place of origin, or particular pack and delivery specifications that are unique to the district.

The RFP process must have a pre-determined scoring method that is clear and fair enough to undergo scrutiny in the case of a challenge. Writing RFPs that are too limited in scope for open competitive responses may also be a factor if challenged. The school district’s legal department can review your proposal to ensure that the form is correct. Alternatively, the purchasing department in many districts may have proposal templates that can be edited for food services use; they may also provide assistance by reviewing your proposal prior to posting. 

Here are two examples of RFPs:

Another tool that can be used in the procurement process is a Request for Information (RFI). It is not used to procure but rather to gather information about the current market. This is particularly useful for procuring locally produced foods that may not be part of your typical procurement chain. The RFI is not restricted in its language or format the way that the IFB or RFP are so you can explicitly state your needs and goals to find out what the potential may be in a particular market. Once you receive the completed RFIs, you can then decide what method of procurement, informal or formal, best suits the situation.

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Purchasing Co-ops and Food Buying Groups

Cooperative purchasing groups are a common procurement mechanism in school food, particularly for procurement of pass-through commodities. They bring efficiencies to the process by joining school districts together to produce buying power through volume, reduce costs, and increase product quality and services. Smaller districts that are commonly burdened by lack of scale often benefit from a cooperative buying situation, but it is important to vet the process specifically to your district’s needs. Detailed explanations of joining or creating a cooperative purchasing group as well as the pros and cons are covered in depth in NFSMI’s Procurement in the 21st Century.

Less typical, but gaining momentum, are buying cooperatives that are specifically created to procure local food. They follow the same principles of a regular school co-op except they focus on Farm to School procurement. The procurement process requires the same rigor of evaluation to determine the appropriate procurement method: informal, IFB, or RFP, but the primary goal is to aggregate volume needs of multiple school districts to drive the market forces and obtain the most competitive pricing.

Know Your Source

The more you know your source and potential vendor partners, the better prepared you will be for an actual working relationship. We recommend that you schedule a visit to the distribution warehouse and transport facility as part of your preparatory work in preparing proposals. If your potential vendors are farmers, visit the farm. Requesting HACCP plans and copies of independent facility safety audits can be included in the RFP, but nothing is as good as seeing a company in action. Your job is to remain impartial while observing their operation. Sharing your district profile with potential vendors can be useful as well. Profile information could include: your district calendar, preferred delivery days, hours of delivery, site vs. central warehouse delivery details, order communication requirements, accounting procedures, and district security procedures. 

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