Soliciting Bids from Commercial Distributors

This Management Bulletin (MB) provides information and guidance on soliciting bids from commercial distributors for U.S. Department of Agriculture (USDA) Foods end products.

In accordance with Title 7, Code of Federal Regulations (7 CFR), Part 3016 or 7 CFR Part 3019, [Note: Part 3016 and 3019 are no longer applicable.] Title 2, Code of Federal Regulations (2 CFR), parts 200, and 400 [part 200, subpart D, 400, and 415] as applicable, and 7 CFR Section 210.21, goods and services for the National School Lunch Program (NSLP) must be procured in a way that ensures free and open competition. School food authorities (SFA) must comply with these regulations for the procurement of commercial food products and USDA Foods end products. Generally, SFAs solicit bids for procurement of commercial food products from commercial distributors and USDA Foods end products from approved USDA Foods processors separately. This often occurs even when the distributor sells commercial food products that are identical to the USDA Foods end products.

USDA Policy Memo FD-119 clarifies that, in some cases, the SFAs may solicit bids for procurement of USDA Foods end products and commercial foods from distributors together. FD-119 also clarifies the requirements for combining the solicitation of these bids and the parties responsible for ensuring compliance with the requirements. Although FD-119 focuses on SFA procurement in the NSLP, it also applies to procurements conducted by SFAs in other child nutrition programs. To view the full Policy Memo, please visit the USDA Commodity Processing Policies Web document at https://fns-prod.azureedge.net/sites/default/files/pmfd119_NSLP_PROC-SolicitingBids_0.pdf. [Note: The preceding web address is no longer valid. Please visit https://www.fns.usda.gov/cn/soliciting-bids-commercial-distributors-end-products-1.]

Requirements for Solicitation

SFAs may solicit bids from a commercial distributor to procure commercial food products and USDA Foods end products if the distributor has already procured the services of a USDA Foods processor. The SFAs must follow federal procurement requirements. In addition, the solicitation and resulting contract must clearly address the specific requirements for USDA Foods end products.

The SFA’s solicitation must provide the following:

• USDA Foods end products must be obtained from a processor that has an approved Master Processing Agreement (MPA) or State Participation Agreement (SPA) with the California Department of Education Food Distribution Program (FDP).
• All USDA Foods end products must have an approved end product data schedule and meet substitution and grading requirements outlined in 7 CFR sections 250.30 [Note: Section 250.30 is no longer applicable.] 250.33 and 250.34(a)(c), respectively.
• The SFA must receive credit for the value of the USDA Foods in the end products through a discount on the gross case price or a refund or rebate after the sale.
• The distributor must work with the processor to ensure the SFA is eligible to receive USDA Foods end products and to determine the quantity of end products and the value of the USDA Foods in the end product.
• The distributor must notify the processor of USDA Foods end product sales so the correct inventory draw-down occurs.

Coordination between the SFAs and the FDP

The SFAs must verify with the FDP that processors providing USDA Foods end products to a commercial distributor have an approved MPA or SPA with the FDP. The SFAs may only have USDA Foods diverted to approved processors. The SFAs must communicate with the FDP regarding the approved USDA Foods end products, the quantity of USDA Foods they are eligible to receive, and the value of the USDA Foods. The FDP must ensure the SFAs are aware of any restrictions in the MPA or SPA related to approved USDA Foods end products, methods of sales, or other provisions. These restrictions must be included in the SFA’s solicitation of a distributor for commercial foods and USDA Foods end products.

SFA Responsibilities

• Ensure processors are approved by checking the Approved Processor List from the FDP Processing Information Web page at http://www.cde.ca.gov/ls/nu/fd/processor.asp
• Obtain the value of USDA Foods from the Commodity File Report, Average Price File, and the Average Cheese Prices on the USDA Processing Pricing Reports Web page at https://www.fns.usda.gov/usda-fis/processor-material-prices
• Request an available product list from the processor to ensure end products are approved

FDP Responsibilities

• Notify the SFAs of the entitlement value of USDA Foods they are eligible to receive or divert to processors
• Notify the SFAs of the quantity and destination of USDA Foods being diverted on their behalf

Coordination Between the Distributor and Processor

The distributor and processor should work together to ensure USDA Foods end products are only provided to eligible SFAs. The distributor must ensure only eligible SFAs receive USDA Foods end products produced using non-substitutable USDA Foods, such as beef or pork.

Often, the commercial products meet substitution requirements and grading requirements as outlined in 7 CFR sections 250.34(a) and 250.34(c) respectively and are considered identical to USDA Foods end products. In such cases, the commercial food products and USDA Foods end products may be commingled at the distributor’s facility and sold to any of their customers. When such food products are sold to eligible SFAs, each SFA must receive a credit for the value of the USDA Foods in the quantity of end products they are eligible to receive.

Distributor Responsibilities

• Ensure only eligible SFAs receive end products containing non-substitutable USDA Foods
• Notify the processor of USDA Foods end product sales in a timely manner so the processor can report the sales to the FDP on the Monthly Performance Reports—this information may be reported electronically
• Work with the processor to ensure the value of the USDA Foods is passed through to the SFAs

Processor Responsibilities

• Provide distributors with a list of eligible SFAs and the cases of USDA Foods end products or pounds of USDA Foods each is eligible to receive
• Work with the distributor to ensure the value of the USDA Foods is passed through to the SFAs

USDA Policy Memo FD-007 provides additional guidance on the coordination between the processor and distributor in the distributor’s sale of USDA Foods end products to SFAs or other recipient agencies. To view the full Policy Memo, please visit the USDA Commodity Processing Policies Web page at https://fns-prod.azureedge.net/usda-fis/sales-end-products-through-commercial-distributors-indirect-discount-and-net-invoice. [Note: The preceding web address is no longer valid. Please visit https://www.fns.usda.gov/usda-fis/sales-end-products-through-commercial-distributors-indirect-discount-and-net-invoice.]

The FDP MB USDA-FDP-02-2012 provides further clarification on FD-007 and is available on the FDP Value Pass Through Systems MB Web page at http://www.cde.ca.gov/ls/nu/fd/mbusdafdp022012.asp [Note: The preceding web address is no longer valid. FDP-02-2012 was superceded by FDP-03-2019 which is located on the U.S. Department of Agriculture Value Pass Through Methods web page at https://www.cde.ca.gov/ls/nu/fd/mbfdp032019.asp.]

If you have any questions regarding this MB, please contact the Food Distribution Program Office by phone at 916‑323-0865 or by email at fooddistribution@cde.ca.gov.