Food and Nutrition Programs

Final Rule, Procurement Requirements for the National School Lunch, School Breakfast and Special Milk Programs

To:	School Food Service Directors
From:	Kathleen C. Millett, Administrator, Nutrition, Health and Safety
Date:	February 11, 2008

The United States Department of Agriculture (USDA) has issued the final rule, Procurement Requirements for the National School Lunch, School Breakfast and Special Milk Programs. This rule was published in the Federal Register on October 31, 2007. USDA highlighted the following key provisions in a January 28, 2008 memo to State agencies:

"Limits a School Food Authority's (SFA) use of nonprofit school food service account funds to costs resulting from proper procurements and contracts.
Requires that allowable costs paid from the nonprofit school food service account be net of all discounts, rebates, and applicable credits.
Requires State agencies to review and approve SFA procurements of food service management companies' services in advance of contract execution.

Each contractor to the SFA must identify the amount of each discount, rebate and other applicable credit on bills and invoices presented to the SFA for payment, and individually identify the amount as a discount, rebate, or in the case of other applicable credits, the nature of the credit. Allowable costs will be paid from the nonprofit school food service account to the contractor net all discounts, rebates and other applicable credits accruing to or received by the contractor under the contract. In addition, the final rule requires the SFA to obtain prior written approval of invitations for bid and requests for proposals for food service management companies before their issuance. Further, the State agency must review and approve the contract terms to ensure contract language requiring compliance with net cost requirements is contained within the contracts. The SFA must incorporate all State agency-required changes into the contract or amendment before executing the contract. These requirements will promote full and open competition in SFA procurements of goods and services, and also provide menus for identifying and correcting problems in contracts before they are signed. The rule, became effective November 30, 2007. The final regulation applies to all new solicitations issued on or after this date. However implementation is being phased in for existing contracts. For solicitations issued prior to November 30, 2007:

Contracts with a term of 12 months or fewer remaining are exempt.
Contracts that have an annual renewal provision may delay implementation until the expiration of the current contract plus one 12-month renewal period, with State agency approval.
Contracts that have a term of more than 12 months may delay implementation up to 24 months when the solicitation for the contract was issued prior to the effective date of this regulation, with State agency approval."

Please share this information with your business managers and procurement specialists. Copies of the final rule published in the Federal register can be obtained at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-21420.pdf. We will keep you posted on any new information and guidance as it is received.

Last Updated: March 12, 2008