Establishing relationships with suppliers that support your program vision and goals is critical. Be an informed buyer. Know your history, your menus, your specifications, and the volumes you need. Do your research to understand pricing indexes and talk to your colleagues about their vendor experiences. Districts that use Food Standards and define specific vendor requirements (mainly for solicitations and RFPs) will often receive better pricing and services, which is a great asset for a district transitioning to a fresh food system.
The federal government requires school district procurement practices to be fair, open, and competitive. For a detailed discussion of the school food procurement regulations and processes, we recommend the Institute of Child Nutrition’s resource manual, Procurement in the 21st Century. For school districts expanding procurement to include purchasing local and regional foods, the USDA Food and Nutrition Service has established the Community Food Systems division, which provides many resources. Up-to-date regulation guidance, webinar trainings, and the excellent resource Procuring Local Foods for Child Nutrition Programs can be found on the USDA's Procuring Local Foods page. This site also offers a step-by-step guide to including local and regional procurement in your plan. For additional resources, visit the Local and Regional Procurement section of The Lunch Box.
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 product description, ingredient profile, pack size, serving size, case weight, frozen or fresh
- 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 77 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.
Formal Procurement Process
Formal bid processes are required when the anticipated dollar volume of the item(s) to be purchased will exceed the micro purchase and small purchase thresholds. There are two primary forms of formal procurement:
- Invitation for Bid (IFB)
- 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. In both processes, the award is presented to the responder with the best overall value.
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 IFBs for a single product (like apples or milk) which are common mainstays of the school meal program.
Districts located in an area without numerous “broad line” distributors (national distributors that carry everything, usually in excess of 4,000 products) or specialty distributors will most likely develop an RFP. The process is still competitive but it is based on factors in addition to the price, such as:
- ability to deliver to multiple sites
- technical expertise
The RFP process includes some negotiation once the proposals are submitted whereas the IFP has no negotiation.
In the case of the RFP, receiving the proposals is just the first step. Objective evaluation and negotiation will need to occur before the award can be presented. A two-step RFP process allows the food service department to rank respondents based on technical response prior to evaluating cost. To complete a two-step RFP:
- Ask the responder to explain how they will achieve the request
- Ask the responder to show the cost of filling the request
Evaluating RFPs requires expertise in the product area as well as contracts. 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. The predetermined scoring method should be 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 the 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.
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.
Here are two examples of RFPs:
Request for Information (RFI)
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.
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. Co-ops create efficiencies 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 shape the process to meet your district’s specific needs. Detailed explanations of joining or creating a cooperative purchasing group (as well as the pros and cons) are covered in depth in INC's Procurement in the 21st Century resource manual.
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, Invitation for Bid (IFB), or Request for Proposal (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.
Two legislation changes have made it easier for school food programs to work with local growers. The most recent statutory changes to the 2017 National Defense Authorization Acts (NDAA) increased the federal micro-purchasing threshold from $3,500 to $10,000. The federal simplified acquisitions threshold was also increased from $150,000 to $250,000. Though state or local rules may be more restrictive than Federal rules, these changes have positively impacted some district procurement activities. The higher thresholds make it easier for districts committed to regional procurement to invest more funds locally.
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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