Food Service Mgmt. Company Contract Preapproval
Nutrition Services Division Management Bulletin
Purpose: Policy, Action Required, Beneficial Information
To: Residential Child Care Institutions
Attention: Residential Child Care Institution Administrators
Date: November 2014
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), 210.24, 220.16, 220.18, 3016.60, and 3019.43; California Department of Education Annual Bid Threshold Adjustment Letter. [Note: Effective October 1, 2015, Title 7, Code of Federal Regulations, sections 3016.60 and 3019.43 has been superseded by Title 2, Code of Federal Regulations, sections 416.1 and 200.319.]
Supersedes: 98-111: Contracting for Management Services (July 1998)
Subject: Food Service Management Company Contract Preapproval
This Management Bulletin (MB) notifies residential child care institutions (RCCI) that all RCCIs and other school food authorities (SFA) participating in the National School Lunch Program (NSLP) and School Breakfast Program (SBP) must obtain prior California Department of Education (CDE) approval for food service management company (FSMC) Requests for Proposal (RFP), proposed contracts, contracts, and contract amendments.
Title 7, Code of Federal Regulations (7 CFR), sections 210.19(a)(5), 210.16(a)(9)–(10), and 220.16(c)(1) mandate this preapproval to ensure that SFAs participating in the NSLP 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 an SFA contracts with to manage any aspect of its school food service operation. An FSMC typically provides these services:
- Full service operation of the food service program
- Inventory management
- Purchasing, preparation, delivery, and/or service of meals
SFAs 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 small purchase threshold.
The annual federal and California state small purchase thresholds for various agency types participating in federal child nutrition programs are as follows:
- As of August 1, 2018, private nonprofit organizations, including RCCIs and nonpublic schools owned and operated by RCCIs (federal threshold): $250,000
- As of August 1, 2018, charter and private schools (federal threshold): $250,000
- As of August 1, 2018, city and county governments: the lesser of the federal threshold ($250,000) or their respective local small purchase threshold
- As of January 1, 2018, public school districts and county offices of education (COE), including nonpublic schools operated by the school district or COE for the 2018 calendar year (California state threshold): $150,000
If the one-year value of contracts for private nonprofit RCCIs is below the federal threshold, an informal procurement process may be used. However, the CDE requires that SFAs submit the formal or informal procurement documents and the proposed contract to the CDE for approval prior to release.
The CDE approval process for the initial procurement and proposed contract includes the following steps:
- The SFA submits the initial procurement package to the CDE Procurement Resources Unit (PRU). The initial procurement package consists of the draft RFP and contract, including a Scope of Work describing the desired services, procurement questionnaire, Procurement Procedures, and Code of Conduct.
- The SFA either conducts an informal procurement process by contacting prospective contractors to obtain a description of the services provided and corresponding price quotes or conducts a formal procurement process by publicly advertising the RFP.
- The SFA conducts a formal or informal procurement process by contacting prospective contractors to obtain a description of the services provided and corresponding price quotes.
- The SFA evaluates the proposals received and selects a responsive and responsible contractor with the lowest cost whose proposal is most advantageous to the program with price and other factors considered.
- The SFA may negotiate certain contract terms (determined by the SFA and approved by the CDE).
- The SFA submits all received bids and the negotiated contract to the CDE for review and approval. Some editing by the SFA and CDE may be necessary before the CDE approves the final contract for execution.
- The CDE reviews and approves the negotiated contract.
- The SFA and FSMC sign the CDE-approved contract, which is then considered executed.
- The SFA submits a copy of the signed contract to the CDE.
- The CDE reviews the signed contract. If the executed contract differs from the CDE-approved contract, the CDE will contact the SFA regarding the unapproved changes to the contract, and possibly withhold program reimbursement funds until the CDE reviews and approves the changes.
The CDE review and approval process for contract amendments (or extensions) includes the following steps:
- The SFA develops and submits the proposed contract amendment to the CDE.
- The CDE reviews and approves the amendment. Some editing by the SFA and CDE may be necessary before the CDE approves the proposed amendment for execution.
- The SFA and FSMC sign the CDE-approved amendment.
- The SFA submits a copy of the signed amendment to the CDE.
- The CDE reviews the signed amendment. If the executed amendment differs from the CDE-approved amendment, the CDE will contact the SFA regarding the unapproved changes to the contract, and possibly withhold program reimbursement funds until the CDE reviews and approves the changes.
Although negotiation is part of the solicitation process, potential contractors may not write or alter the RFP or contract, develop solicitation documents, or conduct the proposal process, if their firm or a subsidiary plans to submit a proposal. If a potential contractor performs any of these functions, the proposer is ineligible to compete for the contract (7 CFR, sections 3016.60[b] and 3019.43). [Note: Effective October 1, 2015, Title 7, Code of Federal Regulations, sections 3016.60(b) and 3019.43 have been superseded by Title 2 CFR, sections 416.1 and 200.319.] RCCIs and other SFAs that allow a potential contractor to perform any of these functions and then award the contract to this contractor may not use cafeteria funds 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 nonprofit food service account (also referred to as cafeteria account or program funds) for any costs resulting from a procurement that fails to meet the requirements of the NSLP or SBP.
SFAs that do not comply with these regulations will be notified in writing of the CDE review and approval process, and given a deadline for submission of all required documents. According to 7 CFR sections 210.24 and 220.18, the CDE can withhold program funds from an SFA that is noncompliant with any part of the applicable federal regulations.
If an SFA has procured an FSMC contract without going through a competitive bidding process, or chooses to be out of compliance with USDA requirements or program regulations, the SFA may not use program (cafeteria) funds to pay the procured FSMC. In such cases, the CDE requires SFAs to annually certify that they are not using program funds 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 Food Service Management Procurement Web page at http://www.cde.ca.gov/ls/nu/sn/fsmcproc.asp; FSMC questions may also be emailed to SFSCONTRACTS@cde.ca.gov.