Food and Nutrition Programs

Required Action for School Food Authorities (SFAs) Contracting with a Food Service Management Company (FSMC)

To:	School Business Officials
From:	Kathleen Millett, Executive Director Office for Nutrition, Health & Safety Programs
Date:	March 26, 2012

Recent release of the final rule entitled Nutrition Standards in the National School Lunch and School Breakfast Programs raises questions about FSMC contracts and whether or not the rule creates a "material change" in existing contracts. United States Department of Agriculture (USDA) recently clarified the rule's effect on FSMC contracts in Policy Memorandum SP 17-2012. The Policy Memorandum describes specific action if implementation of the new rule results in a material change. Specifically, the SFA must either:

Conduct a separate procurement to obtain the desired deliverable that created the material change; or
Conduct a new procurement and ensure that the new solicitation associated with the rebid contains the appropriate specifications and provision to ensure conformance to the final rule. For example, if the SFA's initial solicitation and resulting contract did not address whole-grain rich foods, the SFA would ensure that rebid specifications would procure such foods.

SFA's must utilize their own discretion in determining whether or not a material change has occurred. SFA's should ask the following questions to help determine if the change constitutes a material change:

If there would be an increase or decrease to the cost of the contract, would the increase or decrease in cost have caused bidders to bid differently if the prospective change had existed at the time of bidding?
Would the prospective change materially affect the scope of services, types of food products, volume of food products, etc., in both the solicitation document and resulting contract? For example, the final rule requires schools to serve whole-grain rich products, and specific varieties of vegetables, which already may be included in current contracts.

Please be advised that SFA's conceding a material change, but concluding that a new procurement cannot be completed prior to the 2013-2014 school year, may amend their current contract in order to ensure full implementation of the final rule. Additionally, if FSMCs are unwilling or unable to agree to such an amendment to the current contract, the SFA would need to take immediate action, including:

Termination of the current contract between the SFA and the FSMC in accordance with the termination provisions and issuance of a new solicitation;
Issuance of a separate solicitation to procure the necessary foods in order to ensure compliance with the final rule, consistent with the current contract between the parties.

Please inform this office of material contract changes by sending an e-mail to Bridget Ziniti at bziniti@doe.mass.edu by March 30, 2012. In the subject line, please write "Material Change - Yes" or "Material Change - No". Districts without a material change may proceed according to usual renewal procedures. Renewal contracts with attachments are due June 15, 2012. Districts with a material change must comply with the provisions of Policy Memorandum SP 17-2012. Please provide further detail in the body of the message in the case of a "Material Change - Yes". Thank you for your attention to this matter.

Last Updated: April 2, 2012