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Ready, Set, Procure!:Procurement Regulations in Child Nutrition

An Overview of Federal Regulations and Requirements for SFAs

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1

What is procurement?

Procurement is a multi-step process for obtaining equipment, services, materials or supplies for the lowest price.

All goods and services purchased with child nutrition funds must be procured using federal regulations.

What is procurement? Procurement is a multi-step process for obtaining equipment, services, materials or supplies for the lowest price.

2

Preparing for Procurement

In order for the procurement process to be successful, it is strongly advised that you familiarize yourself with the federal and state regulations prior to beginning the process.

In order for the procurement process to be successful, it is strongly advised that you familiarize yourself with the federal and state regulations prior to beginning the process

3

Procurement Regulations for SFAs Passing the Torch

From ~

7 CFR 3015 Uniform Federal Assistance Regulations

7 CFR 3016 State/Local Governments

7 CFR 3019 Non-Profits

To ~

Super Circular

2 CFR 200

200.318

Procurement Regulations for SFA passing the torch.

Uniform Administrative Requirements currently used for procurement are found in 3016 and 3019.

SFAs must implement the procurement requirements in the new super circular by October 1, 2016 for child nutrition programs.

Procurement regulations can be found in the super circular beginning at 200.318.

4

What is the Super Circular?

The Office of Management and Budget (OMB) promised a 21st century government that was more efficient, effective and transparent. Thus, the super circular was created.

Streamlined OMB circulars on administrative requirements, audit requirements and cost principles.

http:// www.whitehouse.gov/omb/circulars_ default/.

What is the super circular? To deliver on the promise of a 21st-Century government that is more efficient, effective and transparent, the Office of Management and Budget (OMB) streamlined the Federal government's guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. These modifications are a key component of a larger Federal effort to more effectively focus Federal resources on improving performance and outcomes while ensuring the financial integrity of taxpayer dollars in partnership with non-Federal stakeholders.

5

How does this affect SFAs?

Micro purchases

Written procurement procedures

NYS General Municipal Law requires advertising for purchases over $20,000

Written conflict-of-interest policies

Contract Award & Maintenance

Procurement Record Retention

State Review

The super circular expands the requirements SFAs follow. Some of the changes are:

Micro purchases those purchases made which are less than $3,500

SFAs must develop and maintain a written procurement plan which follows federal, state and local laws and regulations. Remember to use the most restrictive. Also, NYS General Municipal law requires school districts to advertise any purchase over $20,000.

Written conflict of interest policies

Records must be maintained a minimum of three years

If Child Nutrition visits your organization for an administrative review or program visit, it is expected that the SFA will have their written policies and records on site and made available to the Child Nutrition representative upon request.

6

The Procurement Bear Claw

OMB has created the procurement bear claw to illustrate the five methods of procurement and the general standards for each.

7

Procurement Standards

There are five general standards:

Documented Policies

Necessary

Full & Open Competition

Conflict of Interest

Documentation of cost/price analysis and vendor selection

The organization must maintain written policies and procedures over procurement that meet the following standards and any other applicable laws and regulations.

Costs incurred must be necessary and cost-effective.

All procurement transactions must provide full and open competition.

The organization must maintain written standards of conduct covering conflicts of interest.

The organization must maintain documentation addressing cost and price analysis, and vendor selection, as applicable for selected method of procurement.

8

Five Methods of Procurement

Micro purchases

Small purchases

Sealed bids

Competitive proposals

Sole source

The SFA needs to determine:

The type of goods or services needed.

The quantity/frequency of whats to be purchased and the quality.

The date when the goods or services are needed.

The location where the goods or services will be delivered.

If a formal or informal bidding process is needed.

9

Procurement Method Micro Purchases

Purchases less than $3,500

No competitive quotes required

Spread purchases out among qualified suppliers

Include in procurement plan

Purchases must be less than $3,500. No competitive quotes are required, but purchases must be spread out among qualified suppliers. Best practice is to include this in your written procurement plan.

10

Procurement Method Small Purchases

Quotes must be obtained from an adequate number of sources.

Obtain quotes from suppliers or public websites

Rate quotes must be obtained from an adequate number of qualified sources it is left up to the organization to determine what adequate is for each procurement

Quotes can be obtained from suppliers or from public websites

11

Procurement Method Sealed Bids

Purchases over $150,000

Publicly advertise and solicited from adequate suppliers

Lowest bid wins

Sealed bids: More than $150,000 Two or more qualified bidders

Publicly advertised and solicited from adequate suppliers

Lowest bidder for the fixed price contract wins

12

Procurement Method Competitive Proposals

Written policy for conducting technical evaluations of reviewing proposals and selecting the recipient.

Most advantageous bidder wins

Price and other factors

Written policy for conducting technical evaluations of reviewing proposals and selecting the recipient

Most advantageous bid wins, price and other factors considered

13

Procurement Method Sole Source

In order for a sole source purchase in any amount, one of the following conditions must be met:

1. The good/service is only available from a single source.

Only one source can provide the good/service during the timeframe required.

Written pre-approval from SED.

Competition is deemed inadequate, after solicitation attempts through one of the other methods.

Good/service is only available from a single source

Only one source can provide the good/service in the time frame required

Written pre-approval from the Federal awarding agency

Competition is deemed inadequate, after solicitation attempts through one of the other methods

14

Simplified Acquisition Threshold (200.88)

Also known as a small purchase

Simplified Acquisition Threshold raised from $100,000 to $150,000

SFAs follow informal procedures to procure goods or services below the simplified acquisition threshold.

Reduces administrative burden

Now lets look at the simplified acquisition threshold. Also known a small purchase, the simplified acquisition threshold was raised from $100,000 to $150,000. This allows SFAs to follow informal procurement procedures for purchases under the $150,000 threshold. This was done in order to make the process more efficient and reduce administrative burden and costs.

15

3 Quotes and a Buy

Develop product requirements and specifications.

Identify and contact at least 3 sources eligible, able, and willing to provide products.

Obtain 3 quotes.

Evaluate to determine the responsible and responsive source with the lowest price.

Award the purchase and document your procedures.

When you have a small purchase, you should follow the following steps for procurement:

Develop product requirements and specs.

Identify at least 3 eligible sources who are willing and able to provide the product.

Obtain at least 3 quotes

Evaluate the responses and award the purchase to the responsive and responsible vendor with the lowest price.

Remember to document the procedures you used.

16

Other Specification Requirements

Buy American 7 CFR Part 210.21(d)

National School Lunch Act requires the purchase of domestic agricultural commodities and domestic food products.

A Buy American clause must be included in all product specifications, solicitations, purchase orders, and any other procurement documents.

Refer to USDA FNS memos SP20-2006, SP28-2009, SP02-2010 and SP18-2011

Another specification requirement when purchasing is to include the Buy American provision. The National School Lunch Act requires the purchase of domestic agricultural commodities and domestic food products to the maximum extent practicable. This may be accomplished by providing a Buy American clause in all product specifications, solicitations, purchase orders, and any other procurement documents in order to comply with the provision. You can refer to the memos listed her for more information.

17

What to do when only one or two bids are received (informal purchase)

Examine your product requirements to ensure they are not unnecessarily restrictive.

Use additional methods to locate vendors/suppliers, e.g., email known vendors, place advertisement in newspaper, follow-up with calls, etc.

Examine any other possible reasons for the limited reply.

If only one or two bids are received after the efforts discussed above, the purchase may be made if the cost is reasonable.

Document the bid process, including efforts made to secure additional bids, etc.

When responses to solicitations are limited, though numerous sources were contacted, SFAs need to:

Examine the product requirements to ensure they are not unnecessarily restrictive.

Use additional methods to locate vendors/suppliers, e.g., email known vendors, place advertisement in newspaper, follow-up with calls, etc.

Examine any other possible reasons for the limited reply.

If only one bid is received after the efforts discussed above, the purchase may be made if the cost is reasonable.

Document the bid process, including efforts made to secure additional bids, etc.

18

Competition Killers

Competitive Procedures must not:

Place unreasonable requirements on firms

Require unnecessary experience

Give noncompetitive awards to consultants or vendors

Have organizational conflicts of interest

Specify only brand name products

Make arbitrary decisions in the procurement process

Write bid specifications that are too narrow and limit competition

Allow potential contractors to write or otherwise influence bid specifications

Provide insufficient time for vendors to submit bids

Use a geographic preference or local in bid specs

Arbitrarily divide purchases to fall below the small purchase threshold

No presentation on procurement methods would be complete without the discussion on competition killers. When conducting competitive procedures, these procedures must not:

Place unreasonable requirements on firms;

Require unnecessary experience;

Give noncompetitive awards to consultants or vendors;

Have organizational conflicts of interest;

Specify only brand name products;

Make arbitrary decisions in the procurement process;

Write bid specifications that are too narrow and limit competition;

Allow potential contractors to write or otherwise influence bid specifications; or,

Provide insufficient time for vendors to submit bids.

Use a geographic preference or local in bid specs, which can unnecessarily restrict free and open competition. However, an optional geographic preference can be used to obtain unprocessed locally grown or locally raised agricultural products.

The use of any of these procedures restricts competition rather than achieving competition, the goal of all competitive procedures.

19

Unnecessary or Duplicative Items

The non-Federal entity's procedures must avoid acquisition of unnecessary or duplicative items.

Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase.

Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach

The non-Federal entity's procedures must avoid acquisition of unnecessary or duplicative items.

Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase.

Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach

20

Procurement Methods

Simplified Purchase Threshold

Informal

Formal

Micro-Purchases

Small Purchases

Sealed Bids (IFBs) & Competitive Proposals (RFPs)

* Requires public advertising

Requires price quotes from at least 3 bidders

Distribute

equitably among suppliers

(Federal Threshold = $150,000)
p>

The next slide provides a visual tool for deciding which procurement method to follow.

21

Formal Procurement Process

Weve talked about the different methods of the procurement process. Now well discuss the formal process in a little more detail. When the value of the purchase exceeds the applicable Federal, State, or local threshold for small purchases, the formal procurement method must be used; however, SFAs may use formal methods with any purchase. These are more rigorous and prescriptive, yet this process results in competition

Formal procurement methods require the development and use of a written solicitation, advertising, a formal written responses demonstrating competition, and must be free of anticompetitive practices.

Step 1 Select the method will a competitive sealed bid or competitive proposal be used?

Developing and Publicizing Solicitations:

Developing Specifications for products and services needed

Developing elements of the solicitation such as terms, conditions and required contract provisions such as Buy American, Allowable costs including rebates, discounts and credits

How responses will be received and what criteria will be used to evaluate responses

Receiving and Evaluating Responses

Once responses are received, these will be evaluated

Invitations for Bid (IFBs) are opened publically and evaluated with price as the only dimension

Competitive proposals have evaluated, top proposals are negotiated and prices are determined as price must be the primary consideration

Contract Award and Execution:

Once contracts are evaluated and the most responsive and responsible bid/proposal is identified, the contract award may occur. Some contracts require prior approval by SED before contract award, such as Food Service Management Contracts.

Manage Contract:

Every contract must be monitored to ensure compliance with the specifications, terms, and conditions contained.

Contract management is more than just a requirement of Federal regulations. Contract management protects Federal funds.

22

Select Method

Develop and Publicize Solicitation

Award and Execute Contract

Manage Contract

Receive and Evaluate Responses

Price/Cost Analysis

Price/Cost Analysis

2 CFR Part 200.323 Contract cost and price.

(a) perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications.

The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals (forecasting).

Before we select which formal method to use, the regulations include a requirement that a cost analysis be conducted. This is conducted so that the methods, informal or formal may be determined and for the purpose of selecting the contract type that will result. According to 2 CFR Part 200.323 Contract cost and price.

(a) SFAs must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the SFA must make independent estimates before receiving bids or proposals.

This means every procurement estimated at OVER $150,000 INCLUDING contract modifications, must include a cost estimate. How does this occur? The good news is that prior year cost records can be used to show the value of purchases for these products or services. These can be documented in the procurement activity by including in the scope a statement something like, in the prior year the Program spent $ X dollars for the goods and services identified in this solicitation. Use your prior year procurement and financial records to determine this value and include it in the new solicitation.

23

What is Competitive Sealed Bidding (i.e. IFB)?

2 CFR 200.320(c)

Bids that are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price

Competitive sealed bidding procedures use an Invitation for Bid. These are publically solicited and evaluated according to cost. IFBs are used when a fixed-price contract is awarded and negotiations are not required with responsive bidders.

24

When is an IFB used? Competitive Sealed Bidding (i.e. IFB)

A complete, adequate, and realistic specification or purchase description is available;

Three or more responsible bidders are willing and able to compete effectively for the business

The procurement lends itself to a firm fixed price contract awarded to the most responsible and responsive bidder made principally on the basis of price.

So what are the elements of competitive sealed bidding? The answer is simple: competitive sealed bidding is a procurement method that contains a complete specifications of products and services, 3 or more responsible bidders respond, and a firm fixed price contract is awarded.

We saw in regulation language that bids are publicly solicited and a firm fixed price contract is awarded; however these may be awarded based on a (lump sum price to one responding bidder, a line item award based on the unit prices to multiple responding bidders, or a combination award to multiple responding bidders based on items that are grouped, or a method clearly stated in the solicitation. The key is that bids are awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method when:

(i) A complete, adequate, and realistic specification or purchase description is available;

(ii)Three or more responsible bidders are willing and able to compete effectively for the business; and

(iii) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price.

25

What are some components of Competitive Sealed Bidding (i.e. IFB)?

Bids must be solicited from an adequate number of known suppliers,

providing them sufficient response time prior to the date set for opening the bids, for all organizations,

the invitation for bids must be publically advertised

What are some components of competitive sealed bidding include:

If sealed bids are used, the following requirements apply:

(i) Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids, for state, local, and tribal governments, the invitation for bids must be publically advertised;

26

What are some components of Competitive Sealed Bidding (i.e. IFB)?

The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond

All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly

(ii) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond;

(iii) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly;

27

What is awarded?Competitive Sealed Bidding (i.e. IFB)

A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. In a firm, fixed-price contract, rebates discounts and credits do not have to be returned to the nonprofit food service account as the vendor factors this into the price they are willing to fix for the contract period;

Any or all bids may be rejected if there is a sound documented reason.

What is awarded?

A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. In a firm, fixed-price contract, rebates discounts and credits do not have to be returned to the nonprofit food service account as the vendor factors this into the price they are willing to fix for the contract period.;

(v) Any or all bids may be rejected if there is a sound documented reason.

28

What is Competitive Proposal (i.e. RFP)?

7 CFR 200.320(d)

The technique of competitive proposals is conducted with more than one source submitting an offer, and either a fixed price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, requirements apply.

Now lets look at competitive Proposal

What is Competitive Proposal (i.e. RFP)? Competitive Proposal uses a request for proposal which describes how technical and cost factors will be considered in making the final determination for the purchase of goods and services. These result in the award of either a fixed price contract or a cost reimbursable contract.

29

What are Some Components of Competitive Proposal (i.e. RFP)?

RFPs must be solicited from an adequate number of people.

RFPs also must be publicized and identify all evaluation factors and their relative importance.

Any responses to publicized RFPs must be considered to the maximum extent practical

SFAs must have a written method for conducting technical evaluations of the proposals received and for selecting recipients

Contracts must be awarded to the responsible vendor whose proposal is most advantageous to the program, with price and other factors considered

Some of the components of a competitive proposal or RFPs are:

RFPs must be solicited from an adequate number of people.

RFPs also must be publicized and identify all evaluation factors and their relative importance.

Any responses to publicized RFPs must be considered to the maximum extent practical

SFAs must have a written method for conducting technical evaluations of the proposals received and for selecting recipients

Contracts must be awarded to the responsible vendor whose proposal is most advantageous to the program, with price and other factors considered

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Additional Provisions when a Cost-Reimbursable Contract is to be Awarded (7 CFR Part 210.21(f))

Allowable costs will be paid from the nonprofit school food service account to the contractor net of all discounts, rebates and other applicable credits accruing to or received by the contractor or any assignee under the contract, to the extent those credits are allocable to the allowable portion of the costs billed to the school food authority;

The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or

We would like to point out that there are additional requirements for procurements resulting in a cost reimbursable contract. These are found in 7 CFR Part 210.21(f).

The school food authority must also include the following provisions in all cost reimbursable contracts, including contracts with cost reimbursable provisions, and in solicitation documents prepared to obtain offers for such contracts:

Please note that The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars;

31

Cooperative or Group Purchasing

Increases buying power to receive the best products at the lowest prices

Must still conform to federal procurement regulations

Piggybacking

Requirements when using a group purchasing or buying organization

Refer to USDA memo SP35-2012

Cooperative or group purchasing occurs two or more SFAs combine their procurement requirements and solicit one bid for goods or services in order to receive the best products at the lowest prices. Pooling resources increases buying power and can decrease the labor spent on procuring goods. The cooperative or group purchasing must conform to federal procurement regulations.

Piggybacking occurs when a public entity uses another public entitys existing contract to procure goods or services at the same or a lower price awarded in the contract. In NYS, public schools can obtain an eligibility application from the Office of General Services (OGS) in order to use state centralized contracts.

Please keep in mind that when opting to use a group purchasing organization or group buying organization, you must follow federal procurement regulations before entering into a contract with the organization. This includes following proper procurement procedures when seeking the services of a group purchasing/buying organization.

You can refer to USDA memo SP35-2012 for more information on group or cooperative purchasing.

32

Terms and Conditions & Provisions

Federal Provisions that apply:

Appendix II Contract Provisions for 2 CFR Part 200 (formerly from 7 CFR Part 3016.36(i). These are the same as before so you know these as:

Administrative, contractual, or legal remedies

Termination clause

Equal Employment Opportunity Executive Order 11245

Copeland Anti-Kickback

Davis-Bacon

Contract Work Hours and Safety Standards

Reporting

33

Lets look at examples of contract terms, conditions, and provisions that often apply to all solicitations especially valued over $150,000. You know these well:

Appendix II Contract Provisions for 2 CFR Part 200 (formerly from 7 CFR Part 3016.36(i). These are the same as before so you know these as:

Administrative, contractual, or legal remedies

Termination clause

Equal Employment Opportunity Executive Order 11245

Copeland Anti-Kickback

Davis-Bacon

Contract Work Hours and Safety Standards

Reporting

Awarding agency requirements and regulations (this includes allowable cost provisions in 7 CFR Part 210.21

Look at the books Comptroller General of the United States, et.al.

Clean Air and Water Act

33


More Federal

Awarding agency requirements and regulations (this includes allowable cost provisions in 7 CFR Part 210.21 (Buy American, allowable cost provisions in cost-reimbursable contracts

Look at the books Comptroller General of the United States, et.al.

Clean Air and Water Act

Debarment and Suspension

Lobbying

New:

2 CFR Part 200.322 Procurement of recovered materials.

For a non-Federal entity that is a state agency or agency of a political subdivision of a state and its contractors must comply with section 6002 of the Solid Waste Disposal Act

34

These are many of the Federal Regulations that must be included in all solicitations.

34


State or Local Provisions:

There may be requirements for insurance for Comprehensive and Liability

BEWARE: Watch out for these to ensure they comply with State requirements and DO NOT exceed these as this may restrict competition

35


Common terms that may be used:

Vendor Invoicing requirements

LEA payment frequency and method

(every 2 weeks, 2/month, 30 days, other)

Delivery requirements, if any, and frequency

Installation

Equipment (provide the utility requirements in the specifications!)

POS equipment

Others?

36

Read slide

36

Certification of Debarment and Suspension

A. Methods for certification of debarment and suspension of prospective vendors. Per 2 CFR Part 180 as adopted and modified by USDA regulations at 2 CFR 417, all program participants must ensure that they do not enter into a covered transaction with a suspended or debarred entity by doing one of the following [2 CFR 180.300)]:

1. Check the EPLS (Excluded Parties List System) which is a part of the System of Awards Management (SAM). This system lists all suspended and debarred organizations;

2. Collect a State or SFA certification form from the organization stating that they are not suspended or debarred; or,

3. Include a clause in their contract and solicitations.

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37

Receiving Responses for IFBs:

Fixed price contracts:

Bids received sealed

Public bid opening


Sealed Bid Document

The way in which responses are received for an IFB may be different from that of a cost-reimbursable contract. Sealed bids are accepted until the date specified in the procurement advertisement then are publicly opened.

38

Sealed Bid Document

Receiving Responses:

Cost reimbursable

Sealed

2 parts to responses price and technical

Public opening not required


Price

2nd

Technical

1st

Cost reimbursable

Bids are submitted sealed


Public opening not required

39

Evaluating Responses


Evaluation is for lowest responsive and responsible along no other dimension than price


The way in which responses are evaluated for an IFB may be different from that of a cost-reimbursable contract. These include:


Evaluation is for lowest responsive and responsible along no other dimension than price

Cost reimbursable


Evaluation document review of best technical response according to evaluation criteria and scoring as stated in solicitation

Negotiation with top responders

Review of price PRIMARY CONSIDERATION in scoring

40


Cost reimbursable



Review of price PRIMARY CONSIDERATION in scoring

Cost reimbursable



Review of price This is the primary consideration in scoring

41

Once evaluated, a contract may be awarded and the contract executed.

Remember, contracts for FSMCs require prior approval by the State agency

Any pre-issuance requirements by the State agency also apply.

Does your State agency have pre-issuance requirements in place?

Award and Execute the Contract

Once evaluated, a contract may be awarded and the contract executed. This may be an official signing with a contract meeting not a bad idea for a meeting of the minds as this can clarify expectations and answer questions.

Remember, contracts for FSMCs require prior approval by the State agency

Any pre-issuance requirements by the State agency also apply.

Does your State agency have pre-issuance requirements in place?

42

Manage Contracts

2 CFR Part 200.318(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders

Once the contract has been awarded, the work begins. Managing contracts is the real work. The work is not complete just because the solicitation, evaluation and contract award has occurred. Many people think the work has finally ended. However, 2 CFR Part 200.318(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders

Contracts must be managed with a process in place for how this works. In every presentation, Forecasting, solicitations, specifications, FSMCs, GPOs/Coops, and USDA Foods Processing Contracts, there will be components of the presentation to show how this works.

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What is the difference in contract types?

Fixed Price contract:

Provides a stated price that is fixed

Provides the maximum incentive for the contractor to control costs and perform effectively

Imposes the least administrative burden on the contracting parties

May contain an economic price adjustment tied to an appropriate index

What are the major differences between the two contract types?

Fixed Price contract:

Provides a stated price that is fixed, without any upward or downward adjustment for the duration of the contract, including for all renewal periods

A firm-fixed price contract provides the maximum incentive for the contractor to control costs and perform effectively, and imposes the least administrative burden on the contracting parties

May contain an economic price adjustment tied to an appropriate index

-The economic price adjustments, which allow an SFA to adjust costs in the contract, must be

tied to an appropriate standard or cost index. Relating the price adjustments in a contract to an

index allows the SFA to ensure that increases under the contract are not without basis. For

example, if fuel prices are increasing drastically, then an appropriate indexsuch as the

Consumer Price Indexwill reflect this change.

- As always, the terms of the economic price adjustment, including the appropriate standards

or indices to which it will be tied, must be expressly identified in the original solicitation and

contract documents.

-Vendor bears little performance risk

44

The difference in contract types?

Fixed price contract:

Price is fixed for the contract duration

Price adjustments authorization and procedures, if any must be included in the solicitation,

must be tied to a standard index such as the Consumer-Price index, and

the frequency of adjustment included

Contract duration may be less than one year depending on market conditions.

Now that we have identified the elements of sealed bidding and competitive Proposals and examples of each, and all components of the steps in the process of purchases that exceed the simplified acquisition threshold, lets look at a few of the differences in the contract types. Price is fixed for the contract duration

Price adjustments, if any must be included in the solicitation, must be tied to a standard index such as the Consumer-Price index, and the frequency of adjustment included

Contract duration is often less than one year depending on market conditions.

45

The difference in contract types?

Cost Reimbursable contract:

Provides for payment of allowable costs incurred in performing the contract

Use when there are uncertainties involved in the contract performance affecting price estimates

Frequently occur in the School Nutrition Programs as cost plus fixed fee contract

provides for the reimbursement of allowable costs plus the payment of a fixed fee to the contractor

Now that we have identified the elements of sealed bidding and competitive Proposals and examples of each, and all components of the steps in the process of purchases that exceed the simplified acquisition threshold, lets look at the differences in the contract types.

Cost Reimbursable contract:

Provides for payment of allowable costs incurred in performing the contract

Appropriate to use when uncertainties involved in contract performance will not permit costs to be estimated with enough accuracy to use fixed price contracting.

Examples of this may include the purchase of a Point of Service system or when contracting Program operations to a Food Service Management Company as these services entail many components that need specific detail to determine the service most advantageous to the Program.

Cost reimbursable contracts frequently occur in the School Nutrition Programs as cost plus fixed fee contract

A cost plus fixed fee contract provides for the reimbursement of allowable costs plus the payment of a fixed fee to the contractor. These fees are fixed, therefore, they are not to change for the life of the contract.

In cost-reimbursable contracts the vendor bears little performance risk; therefore, the cost is not controlled thus, there is no incentive to control cost.

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The Principles of Good Procurement

Now that weve gone over they types of procurement methods, we want to discuss the basic principles of good procurement. Some of these principles may have been briefly discussed in previous slides, but it is important to reiterate the concepts. These areas include:

Free and open competition

Fairness and integrity

Responsive and responsible vendors

Transparency

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Good Procurement

Free & Open Competition

Fairness and Integrity

Responsive and Responsible

Transparent

Free & Open Competition

Procurement procedures may never unreasonably restrict or eliminate competition, thereby giving an advantage to one vendor/supplier over another.

Examples of restrictive competition are:

Placing unfair requirements on vendors/suppliers in order for them to qualify to do business.

Requiring a specific brand name product instead of allowing vendors/suppliers the opportunity to offer a comparable product.

Procurement procedures may never unreasonably restrict or eliminate competition, thereby giving an advantage to one vendor/supplier over another.

Examples of restrictive competition are:

Placing unfair requirements on vendors/suppliers in order for them to qualify to do business.

Requiring a specific brand name product instead of allowing vendors/suppliers the opportunity to offer a comparable product.

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Fairness & Integrity

The procurement process cannot be both effective and self-serving. Reasonable consideration must be given to all comparable products and suppliers despite the SFAs preference for a particular product or supplier.

SFAs must ensure that ethical safeguards are maintained at all levels of the organization and in all aspects of the procurement process. No one in the SFA shall participate in the procurement process and/or awarding of a contract if a conflict of interest, real or perceived, is involved.

The procurement process cannot be both effective and self-serving. Reasonable consideration must be given to all comparable products and suppliers despite the SFAs preference for a particular product or supplier.

SFAs must ensure that ethical safeguards are maintained at all levels of the organization and in all aspects of the procurement process. No one in the SFA shall participate in the procurement process and/or awarding of a contract if a conflict of interest, real or perceived, is involved.

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Fairness & Integrity:Good Practices to Follow

Using the procurement process enables you to obtain quality products or services at the lowest prices.

Develop solicitations that are clear and non-restrictive.

Publicizing solicitations appropriately to the widest possible audience fosters free and open competition.

Write clear evaluation criteria that is not unduly restrictive.

Allow adequate time for vendors/suppliers to respond to your solicitation, ensure transparency in opening and evaluating bids, and make certain the entire process is documented.

Procure the goods or services within the terms of the awarded contract.

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Responsive & Responsible

SFAs must award contracts only to vendors who are:

responsive those vendors who respond to a procurement solicitation and submit a bid for goods or services that meet the SFAs requirements

responsible vendors who are capable of successfully performing the terms and conditions of the contract.

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Transparent

Transparency in the procurement process ensures accountability and cost effectiveness, which is especially important when using federal funds for programs like the child nutrition programs.

Everything the SFA does must be clear, upfront and out in the open.

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Recapping - Dos and Donts

Do

Dont

Ensure purchases are necessary

Document the process from beginning to end

Write clear and concise solicitations and evaluation criteria

Publicize the solicitation and seek as many respondents as possible

Ensure transparency and avoid conflicts of interest

Follow all applicable procurement regulations and requirements

Split purchases to avoid the procurement process

Set unreasonable requirements

Obtain a quote from only one vendor

Award a contract without advertising or based on one or two evaluation criteria

Allow contract changes after a bid has been awarded, which could have altered the outcome if other vendors had been given the opportunity to modify their bid

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Please contact us if you have any questions.

Child Nutrition Program Administration

NYS Education Dept.

89 Washington Ave, Room 375-EBA

Albany, NY 12234Phone: 518-473-8781http://portal.nysed.gov/portal/page/pref/CNKC

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