section 5: purchasing rules

Section 5: Purchasing Rules 1 National Food Service Management Institute

Section 5: Section 5:

Purchasing RulesPurchasing Rules

Food Purchasing Food Purchasing for Child Care Centersfor Child Care Centers


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.

Lesson ObjectivesLesson Objectives

The learner will be able to


Before Buying Groceries . . .Before Buying Groceries . . .

. . .you need to review food

purchasing rules.


“Laws” U.S. Congress State legislatures

“Regulations” Federal Agencies State Agencies

“Policies” and “Procedures” Local agencies Board of directors

Words for Purchasing RulesWords for Purchasing Rules


Federal Regulations Federal Regulations

Code of Federal

Regulations (C.F.R.)

http://www.gpoaccess.gov/cfr/index.html



7 C.F.R. pt. 3019

Private Non-Profit Centers



7 C.F.R. pt. 226.22

For-Profit Centers


7 C.F.R. pt. 3016

Federal RegulationsFederal Regulations

Public Centers


Purchase ProceduresPurchase Procedures

Formal Purchase Procedure

IFB—Invitation for Bid

RFP—Request for Proposal

Informal Purchase Procedure

Small Purchase Procedure (price quotes)


Federal PrinciplesFederal 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.



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.



For-Profit Centers

Must use formal purchase procedures for

purchases of more than $10,000.



Centers must have written purchasing

procedures.



Purchase plan approved by board of directors/owners and policies of board of directors/owners become written purchasing procedures.

Explanation



Accounting records must be

supported by source

documentation.



Invoices

Grocery receipts

Cancelled checks

Bid documents

Examples of source documentation:



The center shall maintain a written standard of

conduct for its employees working with the award and administration of purchasing contracts.



No employee or board member/owner can

Examples of standards of conduct:

ask for gifts from vendors, accept unsolicited gifts valuing more

than $15, or accept unsolicited gifts more than twice

a year.



Purchasing transactions shall be

conducted in a manner to provide full and open competition.



Example 1

Requirement: Grocery stores extend the center 90-day credit.

If only one grocery store can meet this requirement, then competition is restricted.

No unrealistic requirements that restrict competition



Example 2

Requirement: Delivery on Monday morning at 7:00 a.m.

Competition restricted to those vendors delivering on Mondays

No unrealistic delivery requirements that restrict competition



A center shall not knowingly do

business with a company that is

debarred or suspended.



Debarred Center prohibited from contracting

with the company

Suspended Center temporarily prohibited from

contracting with the company

Definitions



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.



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



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.



A clear and accurate description of the

technical requirements shall be provided for

everything that is purchased.

Peaches, canned: sliced; packed in light syrup; to meet U.S. Grade B standard; 24/No. 2½ cans per case.



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.


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.




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



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.



Centers shall ensure that small businesses,

minority-owned firms, and women’s business enterprises have an

opportunity to compete.



The pricing method used shall be

determined by the center.



The “cost-plus-a-percentage-of-cost”

pricing method shall not be used.



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.



Contracts shall be made only

with responsible contractors.



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.



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.



Centers shall make purchasing documents available for review by

the Federal or State Agency when requested.



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.



Conditions for requesting documents:

The purchase is expected to exceed the small purchase threshold and the description specifies a brand name.

Example:Example: Catsup: 24/12-oz bottles per case; Tomato brand only.




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.




A contract modification changes the amount of the contract by more than the small purchase threshold.



Some form of cost analysis

shall be performed for all

purchases.



Example

Store 1: $2.91

Store 2: $2.87

Store 3: $2.93

Price of Whole Milk per Gallon:


three years from the end of the fiscal year the purchase is made (unless the State Agency requests a longer period),


Purchasing records shall be kept for a period of

until an audit or investigation is officially closed.

three years from the end of the fiscal year the last purchase is made (if multi-year contract), or

section 5: purchasing rules

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