Food Service Mgmt. Company Contract PreapprovalManagement bulletin describing the Food Service Management Contract Preapproval.
Nutrition Services Division Management Bulletin
Purpose: Policy, Beneficial Information
To: School Nutrition Program Operators
Attention: Superintendents, Chief Business Officers, and Food Services Directors
Date: March 2023
Reference: Title 7, Code of Federal Regulations (7 CFR), sections 210.2, 210.16(a)(9)–(10), 210.19(a)(5), 210.21(c)(3), 210.21(f)(2), 210.24, 220.16, 220.18, Title 2, Code of Federal Regulations (2 CFR), Section 200.319, California Public Contract Code Section 20111, and California Welfare and Institutions Code sections 10200 et seq.
Supersedes: Management Bulletin (MB) SNP-10-2014: Food Service Management Company Contract Preapproval
Subject: Food Service Management Company Contract Preapproval
Sections 210.16(a)(9)–(10), 210.19(a)(5), and 220.16(c)(1) of 7 CFR mandate this preapproval to ensure that program operators participating in SNPs comply with federal regulations and California state laws that set standards for FSMC procurement and contracts.
Section 210.2 of 7 CFR defines an FSMC as a commercial enterprise or nonprofit organization that a program operator contracts with to manage any aspect of its school food service operation. An FSMC typically provides the following services:
- Full service operation of the food service program
- Inventory management
- Purchasing, preparation, delivery, or service of meals
Program operators currently using, or planning to use, the services of an FSMC must conduct a competitive procurement process, either through an informal or formal procurement method. The method is determined by whether or not the anticipated one-year contract value is above or below the informal purchase threshold.
As of August 1, 2018, the informal threshold is set at $250,000 and the formal threshold is set above $250,000. FSMC procurements will be deemed invalid by the CDE if program operators do not adhere to the proper competitive procurement processes required by the different threshold amounts. If the procurement is found to be invalid, the program operator may be required to rebid using the proper procurement method. These requirements apply to the following agency types participating in federal Child Nutrition Programs (CNP):
- Private nonprofit organizations, including residential child care institutions (RCCI) and nonpublic schools owned and operated by RCCIs
- Charter and private schools
- City and county governments
- Public school districts and county offices of education (COE), including nonpublic schools operated by the school district or COE
If a local jurisdiction has a more restrictive threshold, program operators must comply with the more restrictive level. The CDE requires that program operators submit the procurement documents and the proposed contract to the CDE for approval prior to release. See timeline below.
Sections 210.16(a)(9)–(10), and 220.16 of 7 CFR require program operators to obtain written approval from the CDE for all FSMC RFP or IFB and contract documents before issuance and execution. Should a program operator fail to obtain CDE approval prior to advertising the RFP or IFB or executing the contract, the CDE will consider the program operator noncompliant with federal procurement regulations. Consequently, the CDE may disallow all expenditures up to the point of discovery and compliance with the aforementioned regulations. According to 7 CFR, sections 210.21(f)(2), 210.24, and 220.18 the program operator will need to use other funds to pay the FSMC until approval has been granted.
The CDE procurement approval process starts with the program operator completing the CDE procurement questionnaire, available on the Child Nutrition Information and Payment System Download Forms page, Form ID PRU-09. The program operator’s answers provide a basis for the CDE Procurement Resources Unit (PRU) Specialists to customize their technical assistance.
Timeline to Obtain Approval from the California Department of Education
Most FSMC contracts are effective July 1 with a term of one year with up to four additional one-year renewals, each subject to CDE approval. Considering the length of time required to conduct a competitive proposal process and obtain CDE approval, program operators should submit their bid solicitation documents to the CDE in January, or at least 120 days prior to the anticipated contract execution date, whichever comes first. Program operators using the CDE sample RFP and Model Fixed-price Contract are not exempt from obtaining CDE approval prior to RFP publication and subsequent contract execution.
To obtain approval to execute a contract, the CDE suggests that program operators adhere to the following steps and calendar day timeline*:
- Submit bid package to the CDE no later than January
- CDE preapproval of bid package documents (approximately 30–76 days)
- Advertise the RFP to an adequate number of qualified bidders willing and able to compete (approximately 14 days)
- Proposal submittal deadline (no less than 14 days after program operator posts answers to bidders)
- Evaluation of proposals (approximately 7 days)
- Selection of proposal and award of contract (approximately 7 days)
- Negotiate contract terms and submit for board approval (if applicable) (approximately 5 days)
- Submit negotiated unsigned contract and all solicitation documents to the CDE (approximately 19 days from proposal submittal deadline)
- CDE review and approval of the negotiated contract (approximately 22 days)
- Execute the CDE approved contract (approximately 7 days)
- Submit copy of executed (signed) contract to the CDE (approximately 7 days for final review and approval)
- The CDE reviews and approves executed (signed) contract or requests changes if executed contract differs from approved proposed contract (approximately 2 days for final review and approval)
*Subject to change depending on factors including, but not limited to, the number of revisions needed.
The CDE Specialists will provide assistance and support throughout the solicitation and contract review and approval process. To ensure the required contract review and approval follows the above timeline, program operators need to plan to respond to the CDE requests for information or additional documents within three business days of receipt.
Approval Process for FSMC Contracts that include Child and Adult Care Food Program
The Early Childhood Development Act of 2020 (Senate Bill [SB] 98, Chapter 24, Statutes of 2020) added Welfare and Institutions Code Section 10200 et seq. which transferred the Child and Adult Care Food Program (CACFP) administered by the CDE to the California Department of Social Services (CDSS), effective July 1, 2021.
As a result, the CDE no longer administers or oversees the CACFP in California and does not have authority to approve FSMC contracts that include reference to the CACFP. However, the CDE has worked with the CDSS to streamline the contracting process. As a result of the collaboration between the CDE and the CDSS, Program operators are encouraged to have an addendum to the FSMC contract for the CACFP that includes any requirements imposed by the CDSS. Each of these addendums does not amend, modify, or vary the contract terms for the FSMC contract approved by the CDE. Please consult your own legal counsel for guidance on the specifics for your CACFP addendum, visit https://www.cdss.ca.gov/cacfp or call 1-833-559-2420 for more information.
Approval Process for Contract Amendments or Extensions
Program operators shall adhere to the following steps for the approval process for FSMC contract amendments or extensions:
- Develop and submit the proposed contract amendment or extension to the CDE
- The CDE reviews and approves the amendment or extension. Some editing may be necessary before the CDE is able to approve the proposed amendment or extension.
- Execute the CDE approved amendment or extension
- Submit a copy of the executed amendment or extension to the CDE
- The CDE reviews the signed amendment or extension. If the executed document differs from the CDE approved document, the CDE will contact the program operator regarding the unapproved changes to the amendment or extension. The program operator will need to use other funds to pay the FSMC until approval has been granted.
To ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements. (2 CFR Section 200.319[a]) Program operators that allow a contractor to perform any of these prohibited functions and then award the contract to this contractor may not use cafeteria funds (also referred to as the nonprofit school food service account) to pay for the services provided under the contract.
Use of Cafeteria or Program Funds
Sections 210.21(c)(3) and 220.18 of 7 CFR prohibit the expenditure of funds from the cafeteria fund for any costs resulting from a procurement that fails to meet the federal procurement standards and program specific requirements of the NSLP or the SBP.
Program operators that do not comply with these regulations will be notified in writing of the CDE’s findings, and given a deadline for submission of all required documents or actions. According to 7 CFR sections 210.24 and 220.18, the CDE can withhold program funds from a program operator until the FSMC contract is compliant.
If a program operator has procured an FSMC contract without complying with federal regulations, or chooses to be out of compliance with the U.S. Department of Agriculture requirements or program regulations, the program operator may not use cafeteria funds to pay the procured FSMC. In such cases, the CDE requires program operators to annually certify that cafeteria funds are not used to pay for the services provided by the FSMC.
If you have any questions regarding this MB, please contact your PRU Specialist. For more information on FSMC topics, please visit the CDE Procurement in School Nutrition Programs web page at http://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp. FSMC questions may also be emailed to SFSContracts@cde.ca.gov.
Nutrition Services Division | 800-952-5609