Sample Business Plan for Childcare

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					                Food Purchasing
             for Child Care Centers


     Section 5:
  Purchasing Rules


National Food Service Management Institute   Section 5: Purchasing Rules   1
             Lesson Objectives

The learner will be able to
      explain why centers must follow
       Federal food purchasing rules,
      select the rules which apply to
       his/her center, and
      verbalize a practical application
       for each rule.
National Food Service Management Institute   Section 5: Purchasing Rules   2
             Before Buying Groceries . . .


                           . . .you need to
                               review food
                          purchasing rules.


National Food Service Management Institute   Section 5: Purchasing Rules   3
             Words for Purchasing Rules
       “Laws”
            U.S. Congress
            State legislatures
       “Regulations”
            Federal Agencies
            State Agencies
       “Policies” and “Procedures”
            Local agencies
            Board of directors
National Food Service Management Institute   Section 5: Purchasing Rules   4
             Federal Regulations

                                               Code of
                                               Federal
                                             Regulations
                                               (C.F.R.)

 http://www.gpoaccess.gov/cfr/index.html
National Food Service Management Institute    Section 5: Purchasing Rules   5
             Federal Regulations
             Private Non-Profit Centers

                                               7 C.F.R.
                                               pt. 3019



National Food Service Management Institute   Section 5: Purchasing Rules   6
             Federal Regulations
             For-Profit Centers

                                              7 C.F.R.
                                             pt. 226.22



National Food Service Management Institute   Section 5: Purchasing Rules   7
             Federal Regulations
                              Public Centers

                                               7 C.F.R.
                                               pt. 3016



National Food Service Management Institute   Section 5: Purchasing Rules   8
             Purchase Procedures

      Formal Purchase Procedure
           IFB—Invitation for Bid
           RFP—Request for Proposal

      Informal Purchase Procedure
           Small Purchase Procedure (price
            quotes)

National Food Service Management Institute   Section 5: Purchasing Rules   9
             Federal Principles
               Private Non-Profit Centers
Must use formal purchase procedures for
        purchases of more than $100,000* or
        amount stated in their organization’s
         procedures (if less).
       *At press time, USDA was in the process of issuing changes to its child care
       regulations to increase the current $10,000 small purchase threshold for non-profit
       centers to this higher level. Check with your State Agency for updates.

National Food Service Management Institute                     Section 5: Purchasing Rules   10
             Federal Principles
                                 Public Centers
Must use formal purchase procedures for
         purchases of more than $100,000 or
         amount stated in State law or local
          procedures, whichever is less.
       *At press time, USDA was in the process of issuing changes to its child care
       regulations to increase the current $10,000 small purchase threshold for public
       centers to this higher level. Check with your State Agency for updates.

National Food Service Management Institute                     Section 5: Purchasing Rules   11
             Federal Principles
                            For-Profit Centers

Must use formal purchase procedures for
purchases of more than $10,000.




National Food Service Management Institute   Section 5: Purchasing Rules   12
             Federal Principles


           Centers must
           have written
            purchasing
           procedures.


National Food Service Management Institute   Section 5: Purchasing Rules   13
             Federal Principles

Explanation
Purchase plan approved by
board of directors/owners
and policies of board of
directors/owners become
written purchasing
procedures.
National Food Service Management Institute   Section 5: Purchasing Rules   14
             Federal Principles

                                                Accounting
                                             records must be
                                               supported by
                                                  source
                                             documentation.

National Food Service Management Institute          Section 5: Purchasing Rules   15
             Federal Principles
Examples of
source documentation:
 Invoices
 Grocery receipts
 Cancelled checks
 Bid documents
National Food Service Management Institute   Section 5: Purchasing Rules   16
             Federal Principles

The center shall maintain
  a written standard of
conduct for its employees
 working with the award
  and administration of
  purchasing contracts.

National Food Service Management Institute   Section 5: Purchasing Rules   17
             Federal Principles
Examples of standards of conduct:
No employee or board member/owner can
 ask for gifts from vendors,
 accept unsolicited gifts valuing more
  than $15, or
 accept unsolicited gifts more than twice
  a year.
National Food Service Management Institute   Section 5: Purchasing Rules   18
             Federal Principles

                                                    Purchasing
                                              transactions shall be
                                             conducted in a manner
                                                to provide full and
                                                open competition.


National Food Service Management Institute             Section 5: Purchasing Rules   19
             Federal Principles
Example 1
No unrealistic requirements that restrict
competition
       Requirement: Grocery stores extend the
        center 90-day credit.
       If only one grocery store can meet this
        requirement, then competition is restricted.

National Food Service Management Institute   Section 5: Purchasing Rules   20
             Federal Principles
Example 2
No unrealistic delivery requirements that
restrict competition
       Requirement: Delivery on Monday morning
        at 7:00 a.m.
       Competition restricted to those vendors
        delivering on Mondays

National Food Service Management Institute   Section 5: Purchasing Rules   21
             Federal Principles

         A center shall not
           knowingly do
          business with a
          company that is
            debarred or
            suspended.
National Food Service Management Institute   Section 5: Purchasing Rules   22
             Federal Principles
       Definitions
           Debarred
                Center prohibited from contracting
                 with the company
           Suspended
                Center temporarily prohibited from
                 contracting with the company

National Food Service Management Institute   Section 5: Purchasing Rules   23
             Federal Principles
     Check the Excluded Parties Listing System
      (EPLS) at www.epls.gov to see if a vendor is
      debarred or suspended or
     Require vendors to certify in writing that they
      have not been debarred or suspended if
          they are responding to an IFB/RFP or
          the center expects to spend $25,000 or
           more with them.
National Food Service Management Institute   Section 5: Purchasing Rules   24
             Federal Principles
       Contractors excluded from competing if
       they help develop or draft
         specifications

         requirements

         statements of work

         invitations for bid

         requests for proposal

         contract terms

         purchasing procedures


National Food Service Management Institute   Section 5: Purchasing Rules   25
             Federal Principles
Example
    A center is considering purchasing a new
     commercial refrigerator.
    It contacts a local commercial food service
     equipment distributor to help write the
     specifications.
    When the request for pricing is issued, this
     distributor will not be eligible to offer a price.
National Food Service Management Institute   Section 5: Purchasing Rules   26
             Federal Principles

   A clear and accurate
     description of the                      Peaches, canned: sliced;
                                             packed in light syrup; to
  technical requirements                     meet U.S. Grade B
   shall be provided for                     standard; 24/No. 2½ cans
                                             per case.
     everything that is
        purchased.

National Food Service Management Institute     Section 5: Purchasing Rules   27
             Federal Principles

                                            All factors that will be
                                        considered when deciding
                                          where to purchase food
                                            and supplies shall be
                                        listed in the instructions of
                                          a sealed bid or proposal.

National Food Service Management Institute            Section 5: Purchasing Rules   28
             Federal Principles
Examples
    Delivery to the center shall be made
     after 1:00 p.m. on a day selected by
     the vendor.
    Net 30-day credit terms shall be
     extended to the center.

National Food Service Management Institute   Section 5: Purchasing Rules   29
             Federal Principles

      The use of local
   geographic preference
  laws in deciding where
  and what to purchase is
   not permitted in Child
    Nutrition Programs.

National Food Service Management Institute   Section 5: Purchasing Rules   30
             Federal Principles
Example
    A State writes a law that says that
         apples grown in the State where the center
          is located can be 5% higher and
         the center should buy these apples.
    Centers belonging to the CACFP cannot
     use this law to purchase the higher-
     priced apples.
National Food Service Management Institute   Section 5: Purchasing Rules   31
             Federal Principles

   Centers shall ensure that
       small businesses,
   minority-owned firms, and
      women’s business
      enterprises have an
    opportunity to compete.

National Food Service Management Institute   Section 5: Purchasing Rules   32
             Federal Principles


      The pricing method
        used shall be
      determined by the
            center.


National Food Service Management Institute   Section 5: Purchasing Rules   33
             Federal Principles


         The “cost-plus-a-
        percentage-of-cost”
          pricing method
         shall not be used.


National Food Service Management Institute   Section 5: Purchasing Rules   34
             Federal Principles
Example
    A large center buys from several institutional
     distributors and must obtain price quotes from all the
     distributors.
    Palm Tree distributor suggests that the director could
     save time by allowing them to quote a price of 15%
     over cost.
    With this method the invoice would automatically be
     priced and it would not be necessary to get price
     quotes.
    This type of pricing is not allowed.
National Food Service Management Institute   Section 5: Purchasing Rules   35
             Federal Principles

     Contracts shall
      be made only
     with responsible
       contractors.


National Food Service Management Institute   Section 5: Purchasing Rules   36
             Federal Principles
Example
   An institutional distributor had a center’s
    contract last year.
   The fill rate (percentage of items delivered) was
    below 75% of the items ordered.
   The distribution industry standard is 98%.
   Thus, this distributor is not responsible.
   The center should not make another contract
    with this distributor.
National Food Service Management Institute   Section 5: Purchasing Rules   37
             Federal Principles
Suggestions
   Document poor performance by keeping copies
    of phone calls or letters to a contractor.
   In the instructions for next IFB:
        Specify required fill rate,
        Require potential vendors to provide their fill rate for
         the prior year, and
        State that the center will not consider a supplier
         responsible if there is a record of poor performance.

National Food Service Management Institute   Section 5: Purchasing Rules   38
             Federal Principles

                                                Centers shall make
                                              purchasing documents
                                              available for review by
                                               the Federal or State
                                             Agency when requested.


National Food Service Management Institute               Section 5: Purchasing Rules   39
             Federal Principles
Conditions for requesting documents:
         The State Agency is conducting a review.
         The purchasing procedures fail to comply
          with Federal requirements.
         The purchase is expected to be
            more than the small purchase threshold
             (currently $100,000) and
            made without competition.
National Food Service Management Institute   Section 5: Purchasing Rules   40
             Federal Principles
Conditions for requesting documents:
       The purchase is expected to exceed the
        small purchase threshold and the
        description specifies a brand name.

              Example:
              Catsup: 24/12-oz bottles per
              case; Tomato brand only.
National Food Service Management Institute   Section 5: Purchasing Rules   41
             Federal Principles
Conditions for requesting documents:
         The purchase method is a sealed bid (IFB)
          and the purchase is expected to be
            more than the small purchase threshold
             and
            awarded to a company other than the
             responsive low bidder.

National Food Service Management Institute   Section 5: Purchasing Rules   42
             Federal Principles
Conditions for requesting documents:
       A contract modification changes the
        amount of the contract by more than the
        small purchase threshold.




National Food Service Management Institute   Section 5: Purchasing Rules   43
             Federal Principles

                                              Some form of
                                              cost analysis
                                                 shall be
                                             performed for all
                                               purchases.

National Food Service Management Institute           Section 5: Purchasing Rules   44
             Federal Principles
Example
Price of Whole Milk per Gallon:
         Store 1: $2.91
         Store 2: $2.87
         Store 3: $2.93


National Food Service Management Institute   Section 5: Purchasing Rules   45
             Federal Principles
 Purchasing records shall be
 kept for a period of
     three years from the end of the
      fiscal year the purchase is made
      (unless the State Agency requests
      a longer period),
     three years from the end of the fiscal year the
      last purchase is made (if multi-year contract),
      or
     until an audit or investigation is officially
      closed.
National Food Service Management Institute   Section 5: Purchasing Rules   46
                     This training was conducted by the




    National Food Service Management Institute
                                The University of Mississippi
                                        www.nfsmi.org
                                         800-321-3054

National Food Service Management Institute              Section 5: Purchasing Rules   47
               National Food Service Management Institute
               The University of Mississippi




               Mission: To provide information and services that
                promote the continuous improvement of child nutrition
                programs
               Vision: To be the leader in providing education,
                research, and resources to promote excellence in child
                nutrition programs

National Food Service Management Institute         Section 5: Purchasing Rules   48

				
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