Food and
Nutrition
Service
Braddock
Metro Center
1320
Braddock
Place
Alexandria
VA 22314
DATE: April 21, 2023
MEMO CODE: SP 13-2023
SUBJECT: Best Practices for Contracting with Food Service Management Companies
TO: Regional Directors
Special Nutrition Programs
All Regions
State Directors
Child Nutrition Programs
All States
Issuing
Agency/Office:
FNS/Child Nutrition Programs
Title of Document:
Best Practices for Contracting with
Food Service Management Companies
Document ID:
Z-RIN:
Date of Issuance:
April 21, 2023
Replaces:
No
Summary:
This memorandum provides information regarding procurement
practices for the School Breakfast Program and the National
School Lunch Program. 2) This memorandum relates to Program-
specific procurement regulations at 7 CFR 210.16, 210.19(a)(5),
210.21, and 220.7, 220.16 and Federal procurement standards at 2
CFR 200.318-327 This memorandum applies to State agencies
administering and school food authorities implementing the School
Breakfast Program and the National School Lunch Program.
The Food and Nutrition Service (FNS) recognizes that as a result of the COVID- 19 pandemic,
State agencies (SAs) and school food authorities (SFAs) have encountered various challenges
related to procurement when administering and operating the school meal programs. Some of
these challenges include supply chain disruptions, unanticipated cancellations of FSMC
contracts, and increased food and supply prices. SAs and SFAs have worked tirelessly to
overcome these challenges and have demonstrated an abundance of flexibility in identifying
solutions in order to continue providing healthy and nutritious meals and snacks to students
nationwide.
As part of the pandemic response, FNS provided additional financial and technical assistance to
help states and operators meet these challenges. FNS continues to evaluate SAs’ and schools’
needs in order to provide information and tools to help navigate the many challenges of
procuring food and supplies supporting the school meal programs. This memorandum provides
additional procurement-related technical assistance and information for SAs and SFAs to
consider when entering into and executing contracts with Food Service Management Companies
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(FSMCs). FNS plans to provide additional procurement and contracting guidance in the future.
Finally, FNS is assessing future rulemaking regarding procurement and contracting in the school
meal programs.
Background
States and SFAs are subject to the Program-specific procurement regulations, such as 7 CFR
210.16 , 7 CFR 210.19(a)(5), 7 CFR 210.21, 7 CFR 220.7, 7 CFR 220.16 and Federal
procurement standards, at 2 CFR 200.318-327, as applicable. States are responsible for the
oversight of SFAs’ operations of programs, including procurement practices, and provide
significant technical assistance to SFAs. While many SFAs independently operate their school
meal programs by entering into contracts for food and supplies, some SFAs contract with
FSMCs to execute parts of the SFA’s food service operations. In addition to Federal regulatory
requirements, SFAs are subject to applicable state and local laws.
FSMC Contract Considerations
Before Going Out to Bid
• Assess needs:
o When considering pursuing a FSMC contract, SFAs first need to determine what
aspects of the school meal program need to be managed. SFAs should also ensure
they maintain any required Program requirements outlined in 7 CFR 210.16(a)
and 220.7(d)(1).
o SFAs can contract for some services using informal procurement methods (2
CFR 200.320(a)).
o The value of FSMC contracts generally exceeds the simplified acquisition
threshold used for informal procurements; therefore, SFAs must use formal
procurement methods (sealed bid or proposal). (2 CFR 200.320(b)). A Cost
Reimbursable
1
or Fixed Price
2
contract would be used when choosing a proposal
(2 CFR 200.320(b)(2)).
• Use required forms:
o Many SAs require use of a template for contracts between SFAs and FSMCs.
o SFAs should add to contracts all specific requirements and modifications and
request SAs approval prior to execution. (7 CFR 210.16(a)(10) and 7 CFR
220.16(c)(2)).
• Utilize a State approved vendor list when choosing to send a solicitation to specific
FSMCs.
• Ensure a potential FSMC is registered with the SA, if required 7 CFR 210.19(a)(5).
• Consider including a cost escalation clause in each contract, describing the frequency and
amount of change in cost during the contract period. SFAs should:
o include any basis for adjustments;
o include the basis for the amount of change (e.g., an economic price adjustment
tied to a standard index); and,
1
Cost Reimbursable contract is defined as a contract that provides for payment of incurred costs to the extent
prescribed in the contract, with or without a fixed fee. (7 CFR 210.2)
2
Fixed-price contract means a contract that charges a fixed cost per meal, or a fixed cost for a certain time
period.
Page 3
o ensure that built in cost adjustments are reasonable and realistic to prevent
contract modifications that may result in a material change.
• Consider defining material change in the contract.
o If material change is not defined in the contract, then SAs and SFAs will need to
work with their legal counsel to assess whether a material change is occurring
after the contract is awarded and executed.
o Including information in the contract on material change/ defining it will provide
clarity for all parties.
• Conduct market research on the FSMCs that work within the surrounding region. There
may be an opportunity to visit other SFAs that employ an FSMC and allow for
tours/visits. Complete due diligence and review companies and their capabilities before a
solicitation is made public.
Labor Contract Provisions to Consider:
• To ensure effective and efficient continuity of service, SFAs can incorporate a first right of
refusal clause for individuals employed under the SFA’s current food service model. This can
benefit the Program by ensuring the nutritional needs of children are not disrupted during a
time of transition.
• Consider a provision requiring the contractor to provide staffing minimums based on the
number of programs and level of participation at schools. Include language requiring SFA
approval prior to decreasing staff at any school site.
• To ensure an appropriate staffing level at each school and to avoid delays in service, consider
developing language around minimum wait times for students.
• Consider a provision requiring the contractor to demonstrate a plan to attract, train, and retain
a skilled and well-qualified workforce; and which at a minimum provide benefits consistent
with other district employees. Provisions of such a plan could include offering family-
sustaining wages with clear opportunities for wage progression alongside skill progression;
employer-sponsored health insurance and pension/retirement coverage options; personal and
family benefits, such as paid family and medical leave, parental leave, paid sick leave, other
paid time off, and mental health support, etc.; as appropriate, caregiving supports like flexible
schedules, telework, childcare facilitation, and back-up childcare; predictable scheduling; and
correct classification of workers as permanent employees and notification of rights of
employees to all workers (including those classified as independent contractors.
• Consider a provision requiring the contractor to support and communicate to workers
regarding the free and fair choice to form a union.
• Include language to ensure labor and administrative costs are broken out to confirm services
are not double billed. Sample language below may be used.
o Invoices should show the number of meals/meal equivalents accounted for at the point
of sale system for each type of meal service, charges for other food or service, credit
for USDA foods used, discounts or rebates and credits due to the SFA, any other
adjustments required such as non-compliance or fiscal action.
Page 4
Additional Contract Provisions to Consider:
• Include language that FSMCs are required to conduct program operations in accordance
with program requirements and include any applicable FNS instructions, policy, and
regulatory citations (depending on what programs will be operated).
• If the solicitation includes a provision for the FSMC to procure food, supplies,
equipment, or other services, include in the contract that these items must be purchased in
compliance with Federal and Program procurement regulations. This includes meeting
Buy American requirements.7 CFR 210.21(d) and 220.16(d). SFAs should work with
their SA and ensure that their contract includes requirements around documenting
domestic food purchases, including the ability to separately identify these costs.
• Include language that the FSMC accepts liability caused by FSMC negligence for claims
assessed as a result of Federal/State reviews/audits, corresponding with the SFA’s period
of liability.
• Include language detailing FSMC responsibilities, as applicable:
o Maintaining pertinent records at the SFA for required retention period;
o Conducting nutrition education;
o Calculating program and non-program food revenue and expenditures; and/or
o Meeting professional standards training requirements.
• Include language that helps support the SFA’s contracting monitoring (e.g. periodic
requests for meal pattern compliance documentation, requiring the FSMC to participate
in regularly scheduled check-ins, etc.)
• Consider applying a geographic preference when procuring unprocessed locally grown or
locally raised agricultural products and may determine what areas are considered local.
• Consider adding a provision to allow for changes in meal delivery and packaging in case
of an emergency.
Awarding the Contract
• When the SFA solicits a proposal, the SFA must have a written method for conducting
technical evaluations and making selections of the proposals received.2 CFR
200.320(b)(2)(ii) and (iii). The SFA should:
o use evaluation criteria with a point system to rate each category;
o ensure that the weight given to the cost of deliverables is adequate to evaluate the
proposal. While cost is important, other factors can be considered as well, when
conducting the proposal method: and,
o award the contract to the bidder with the highest score.
• When the SFA solicits a sealed bid method, the SFA must award the contract to the most
responsible and responsive bidder with the lowest price.2 CFR 200.320(b)(1).
• SFAs must take affirmative actions necessary to ensure that minority businesses,
women/s business enterprises and labor area surplus firms are used, such as ensuring such
businesses are on the solicitation list.(2 CFR 200.321(a) and (b).
Monitoring the Contract
• The SFA should regularly communicate with the FSMC to ensure that the menus meet
meal pattern requirements. This could include requesting completed meal pattern
compliance worksheets, production records, and nutrient analyses. The SFA should also
set up process for receiving, reviewing, and monitoring these documents.
Page 5
• The SFA should request interim costs statements for cost reimbursable contracts in order
to track spending, if helpful or needed. A request for a monthly breakdown of all food
and disposable expenditures along with supporting invoices, bills, receipts, rebates, or
refunds could be included in the contract.
• The SFA and FSMC should have regularly scheduled check-in meetings to discuss any
needs, requirements, areas for improvement, etc.
o Meetings may be scheduled throughout the duration of the contract to ensure all
contractual obligations and expectations are being met for both parties involved,
as well as to troubleshoot and provide any technical assistance, as needed.
o The SFA is ultimately responsible for program compliance. Regular visits can
help ensure FSMC compliance and keep lines of communication open.
Changes to the Contract
If a change to the contract is needed, a cost or price analysis must be completed if the contract’s
value is above the simplified acquisition threshold, including contract modifications (2 CFR
200.324(a)). Once the cost or price analysis is obtained, the SFA’s or SA’s legal counsel will
determine if it is a material change after reviewing the contract and the contract amendments.
FNS does not define material change and discretion lies with SFA’s or SA’s legal counsel unless
the contract stipulates any information. SA review and approval of such amendments are
required prior to execution (7 CFR 210.16(a)(10) and 220.7(d)(1)(ix). While contract
modifications may not be required or needed, if there are instances where costs increase, and the
SFA is able to absorb these costs given new or unforeseen circumstances, a contract modification
may be the correct course of action, depending on the terms of the contract.
Contract Cancellation
If a contract is terminated and the situation warrants it, SFAs can consider using informal
procurement methods (2 CFR 200.320(a)) or noncompetitive procurement (2 CFR 200.320(c),
commonly referred to as an emergency procurement, as applicable, to help ensure continuity of
Program operations.
Page 6
FNS is committed to ensuring that SAs and SFAs have the information and tools needed to
navigate challenges procuring food and supplies that support the school meal programs. FNS will
continue to identify additional information and resources that are needed for operators to
successfully implement the Programs.
SAs are reminded to distribute this memorandum to Program operators immediately. Program
operators should direct any questions concerning this guidance to their respective SA. SAs with
questions should contact the appropriate FNS Regional Office.
Sincerely,
Jessica Saracino
Director
Program Monitoring and Operational Support Division
Child Nutrition Programs
JESSICA
SARACINO
Digitally signed by
JESSICA SARACINO
Date: 2023.04.21
13:23:07 -04'00'
