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Procuring Services of Purchasing Cooperatives, etc


Nutrition Services Division Management Bulletin
Purpose: Policy, Beneficial Information
To: School Nutrition Program Sponsors Number: USDA-SNP-38-2012
Attention: Food Service Directors and Business Officials Date: September 2012
Subject: Procuring Services of Purchasing Cooperatives, Group Purchasing Organizations, Group Buying Organizations, etc.
Reference: U.S. Department of Agriculture (USDA) , Food and Nutrition Service, USDA Policy Memo SP 35-2012

This Management Bulletin (MB) provides guidance to school food authorities (SFA) that encounter well meaning entities that self-identify as purchasing cooperatives, group purchasing organizations, and group buying organizations, etc. These entities often represent to SFAs that it is not necessary to engage in formal procurement efforts in order to retain the entities’ services. This MB outlines applicable regulatory provisions and principles applicable to SFAs seeking the services of such entities. SFAs can view U.S. Department of Agriculture (USDA) Policy Memo SP 35-2012: Procuring Services of Purchasing Cooperatives, Group Purchasing Organizations, Group Buying Organizations, etc. on the USDA School Meals Policy Memos Web page at http://www.fns.usda.gov/cnd/governance/policy.htm.

Importance of Competition

The competitive bid process is a key component of federal procurement regulations. All SFAs must follow federal procurement regulations when entering into contractual agreements with entities for goods or services. SFAs are required to conduct procurement transactions consistent with full and open competition, in compliance with Title 7, Code of Federal Regulations, sections 210.9, 210.21, and 3016.36(c). The preceding requirements apply when an SFA seeks the services of an entity such as a purchasing cooperative, group purchasing organization, a group buying organization, or any entity offering to facilitate access to those types of entities. This applies even if the services are offered at no charge. SFAs are strongly encouraged to seek input from the Nutrition Services Division (NSD) before deciding to use any services without conducting a competitive procurement.

Cooperatives and School Food Authorities

Conducting a competitive procurement is not required if an SFA elects to participate in a cooperative comprised solely of other SFAs who joined together to increase purchasing power. An SFA would not need to undertake the procurement process because the cooperative is designed to act on its own behalf. A cooperative would comply with federal procurement regulations when procuring goods and services for its members.

To be clear, a cooperative that is comprised solely of SFAs procuring as a collective group of SFAs must procure in the same manner as an individual SFA. SFAs should practice due diligence to assure that a cooperative is comprised solely of SFAs that act on their own behalf. If the cooperative contains a third party member that is not an SFA, the SFA cannot join the cooperative without conducting a competitive procurement.

Intergovernmental Cooperation and “Piggybacking”

While intergovernmental agreements can benefit both SFAs and state agencies (SA), an SFA may only enter into an intergovernmental agreement with an SA or local government agency which allows the SFA to join or “piggyback” onto an SA or local governmental entity and a goods or service provider when that agreement was procured consistent with applicable Child Nutrition Programs (CNP) regulations. Careful review of the solicitation issued by the SA or governmental agency will ensure compliance with applicable CNP regulations, while ensuring that the additional scope in services does not create a material change. A material change is a modification that exceeds the terms of the original solicitation and resulting contract, and that is substantial enough that had other bidders been aware of the change during the bidding process, they might have bid differently.

SFAs are strongly encouraged to obtain documentation from the parties involved in the existing contract to ensure that there are provisions providing for the return of discounts, rebates, and other applicable credits. The SFA should also check the contract for compliance with other federal requirements. An SFA may “piggyback” onto an SA or local governmental entity’s procured cost reimbursable contract if the original contract between the state or local governmental entity and contractor contains program requirements pertaining to the return of discounts, rebates, and other applicable credits to the SFAs nonprofit food service account. It is advised that an SFA consult legal counsel to ensure that any existing contract will accommodate access to all records, reports, and documents, ensuring that rebates, discounts, and other applicable credits accrue to the SFA.

Material changes to the existing contract may arise as a result of the “piggybacking” because the parties to the existing contract may not have anticipated the increased quantity of goods and services necessary to fulfill the needs of the SFA. Consequently, an SA or local governmental entity may have to rebid at the next juncture because of these material change issues.

SFAs should seek guidance from the NSD prior to executing an intergovernmental agreement with an SA or local governmental entity which allows the SFA to “piggyback” onto an existing contract.

If you have any questions regarding the contents of this MB, please contact your School Food Service Contract Specialist by phone at 916-319-0636.

Questions:   Nutrition Services Division | 800-952-5609
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