An excerpt of the forthcoming report from SNA’s Procurement Task Force on managing the complexities of doing business in K-12 school foodservice. School nutrition operators and industry alike have expressed frustration and concern about the lack of knowledge and proficiency—by all parties—with the procurement processes required in the K-12 school foodservice environment. There are many factors that lead to angst. There is an education gap. Operators procrastinate on complex, time-consuming and overwhelming procurement tasks. There is a lack of uniformity and standardization in the process. The result: It is difficult to get the right product at the right time in the right amount to the child’s plate. To better understand and quantify the current state of procurement in the school nutrition environment, SNA convened a task force to explore the issue in Fall 2015. Members of the task force (see the box on page 26) represented the diversity of SNA; they included large and small districts, new and tenured directors and various geographic regions. Manufacturers and distributors, state agency personnel and representatives of USDA served as technical advisors. The outcome of their meetings and discussions is a “white paper” report, which documents the state of procurement in school nutrition; identifies potential strategies SNA may take to promote understanding of and compliance with the procurement process; and encourages the implementation of best practices that foster a fair, open, transparent and competitive procurement environment. The full report features sections on the law, education and training, distribution and manufacturing, methodology of procurement, cooperative purchasing groups and group purchasing organizations (GPOs), contract administration and messaging and communications. Each section includes background information, identifies what’s working—and what’s not working—and makes recommendations for potential solutions. Additional resources and helpful links are also featured. The complete report is expected to be available for download from SchoolNutrition.org later this month. An excerpt of the section on distribution and manufacturing follows. DISTRIBUTION & MANUFACTURING Background K-12 school foodservice is a highly specialized segment in the foodservice industry. Prescriptive rules not only govern what schools can serve, but also affect processing and distribution steps, such as continual USDA inspections and pathogen testing. Thus, many manufacturers must provide dedicated line time for producing school-specific products that are frequently not acceptable in other foodservice channels. Furthermore, school procurement is extremely price sensitive, limiting the margins available to vendors. This, along with other factors, may limit overall competitions as it reduces the incentive to enter the K-12 market. While a few very large school districts contract directly with food processors and manufacturers and take delivery at their own warehouses, the majority of school districts contract with intermediary distributors. Distributors provide many value-added services for school district nutrition programs. By consolidating orders for a number of schools, the distributor offers economies of scale that can reduce costs. Distributors also may act as agents for districts in making payments to manufacturers, as well as managing USDA Foods inventories. There are several types of distributors providing a variety of services. Broad line distributors serve a wide variety of customers ranging from non-commercial institutions (like schools) to the full spectrum of restaurants (mom-and-pop, national chains and white tablecloth). Working with a broad line distributor may be advantageous, as its overall size and the volume it handles may result in better pricing and a wider variety of available goods. On the other hand, the broad line distributor may not fully understand the special needs of K-12 school nutrition operations and may be reluctant to carry the particular products that schools have specified and/or be unwilling to provide the level of service schools require at the price point that schools need. That said, some national and regional broad line distributors have made K-12 school nutrition a target market and have added school specialist positions to their staff, they are expected to take the time to understand this channel. In certain areas of the country, there are specialized distributors that serve specific channels like school nutrition. These distributors usually have a better understanding of school needs, including the very specialized management of USDA Foods. In some states, these commercial distributors also manage the inventory and distribution of USDA Foods Direct Delivery (brown box) products. Regardless of the type of distributor that a school district enters into a contract with, it must follow federal law in the procurement of these services. Depending on the size of the account, schools may opt to use one of five approved procurement approaches, including small purchase/informal procurement, sealed bids and Requests for Proposal (see “To Bid or Not to Bid…” page 32). What Is Working Most school nutrition operations are able to order and receive the products they need to provide healthy meals to students. In most markets, there is competition for business, which helps keep prices down. In some areas of the country with many small school districts spread out over large geographic areas (like Wyoming or West Texas), commercial distributors have been able to replace or supplement state distribution systems for USDA Foods Direct Delivery products. One area that has caused considerable confusion over the years is whether a vendor is permitted to help write specifications for schools. The language in general procurement regulations prohibits vendors who write specifications from bidding on the resulting procurement. However, a part of the National School Lunch Act law includes a limited exemption for schools where vendors can provide “specification information.” What’s Not Working There are a number of challenges for manufacturers and distributors working in K-12 school nutrition. From their perspective, the problems can be summed up in the quality of procurement documents issued and processes followed by local school nutrition operations. • Bid documents tend to be poorly written. If a purchasing department for a large school district manages the procurement process, as opposed to a school nutrition department, the responsible staffers may not understand the nature of school foodservice distribution, or may not fully understand federal procurement laws. • Service requests are frequently unrealistic with numerous delivery locations and a very narrow window of time. For example, “Deliveries must be made between 6:00 and 8:00 or 9:00 and 11:00 on Tuesdays to all locations. • Specifications are either too general, providing insufficient information to bid the items the district wants, or too specific, limiting what products the distributor can offer. • Bid lists are not regularly reviewed and culled of items that are no longer needed, resulting in extensive bids when only a fraction of the items will be ordered. • Forecasting is poor, resulting in wildly exaggerated quantities. • Orders are not placed in a timely fashion and do not take into account manufacturer lead time needs. • There is no consistency or consolidation of specifications among districts in a purchasing cooperative or a particular geographic area. Districts may request a multitude of variations. For example, a distributor might be asked to carry 30-40 different burger products. Slotting so many Stock Keeping Units (SKUs) adds cost. • School meal specifications are not consistent with commercial specifications, requiring SKUs for schools that cannot serve other channels. For example, the USDA low-sodium specification for vegetables served in K-12 school meal programs is not standard for low-sodium commercial products. Items brought in for, but not ultimately bought by schools (because of the aforementioned poor forecasting) have no alternate outlets. • The twin trends among school nutrition operations to buy local and increase onsite cooking methods puts greater pressure on the broad line distributors. • Many, if not most, schools do not include a formal agreement with their distributors that details the terms and conditions of the contract, relying instead on the procurement document. Similarly, there needs to be agreement between distributors and processors outlining each party’s responsibilities and liabilities. • There is concern that not all of the partners and stakeholders involved in the procurement process receive all of the information about pending procurements. • Often school nutrition operators request (or even demand) a number of perquisites from vendors, ranging from gifts or materials for staff meetings and events or student-focused activities to support education and marketing. These requests most likely violate federal (and state) procurement rules, and almost always would violate ethical purchasing guidelines. They also inevitably add cost. Procurement Solutions & Next Steps As is true for virtually all areas of the procurement puzzle, education is an essential step to improvement. School districts must learn to be better buyers. Suggestions for improving an understanding of the issues follow. • Develop and disseminate training materials that specifically address the concerns cited in the previous section. SNA, USDA and State agencies all have a part to play in this effort. • USDA has mandated that states conduct procurement reviews independent of the Administrative Review. To facilitate success in such reviews, both the state reviewer and the district being reviewed need more comprehensive understanding of the technicalities of procurement and procurement law. Training and technical assistance is a must for all parties. • Develop a culture of partnership in the procurement process. If the business is not profitable, vendors will exit the market, resulting in more limited competition and less-favorable pricing models. • Schools should consider pre-bid vendor conferences, either with a group of vendors, or one-on-one to identify specific options that would reduce costs for all parties. • Develop written standards of conduct. Federal law requires all school districts to have both a written code of conduct for their procurement activities, as well as written procedures for all of their purchasing. Most states require annual certification of conflict of interest. Vendors would do well to follow this example. If a vendor has a written ethics/conduct policy, they can rely on it in responding to customer requests that might be considered unreasonable or unethical. • Elevate the importance of procurement as a responsibility of the school nutrition staff. While it is understood that this area competes with the many other demands on directors’ time and attention, procurement is a topic too often set aside for what are perceived as more pressing needs. SNA Procurement Task Force Chair Becky Domokos-Bays, PhD, RD, SNS Loudoun County Public Schools, Loudoun, Virginia District Director-Large District Marla Caplon, RD, LD Montgomery County Public Schools Rockville, Maryland District Director-Large District Gitta Grether-Sweeney, RD Portland Public Schools Portland, Oregon District Director-Large District Rick Hughes, SNS Colorado Springs School District 11 Colorado Springs, Colorado District Director-Large District Curtistine Walker Pittsburgh Public Schools Pittsburgh, Pennsylvania District Director-Medium District Valerie Bowers, SNS Forsyth County School District Cumming, Georgia District Director-Medium District Chris Burkhardt, SNS Lakota Local School District Liberty Township, Ohio District Director-Medium District Jill Kidd, MS, RD, SNS Pueblo School District 60 Pueblo, Colorado District Director-Small District Ariane Maori Shanley South Kitsap School District Port Orchard, Washington District Director-Small District Siri Perlman Solana Beach School District Solana Beach, California District Director-Small District Micheline Piekarski, SNS Oak Park and River Forest High School District 200 Oak Park, Illinois District Director-Management Company Daniel Witkowski Haddonfield Memorial High School Deptford, New Jersey State Agency Lynn Harvey, EdD, RDN, SNS North Carolina Department of Public Instruction Raleigh, North Carolina State Agency Donna Parsons, SNS Office of the Superintendent of Public Instruction Olympia, Washington Industry Gary Vonck KeyImpact Sales & Systems Naperville, Illinois Industry Chuck Gentile ConAgra Foodservice Troy, Ohio Industry Barry Sackin, SNS B. Sackin & Associates Murrieta, California Industry Ronald McBride Advantage Waypoint Carmel, Indiana Industry Michael Ptak JTM Provisions Co. Harrison, Ohio Industry Sean Leer Gold Star Foods, Inc. Seal Beach, California
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