2nd Edition FIRST CHOICE

A Purchasing Systems Manual for School Food

2nd Edition

Produced by the National Food Service Institute Through a Agreement with United States Department of Agriculture, Food and Nutrition Service

EX59-02 Suggested Reference Citation: U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service Management Institute. (2002). First choice: A purchasing systems manual for school food service. 2nd Ed. University, MS: National Food Service Management Institute.

School food service personnel will notice several temperature differences in the recommendations given in this manual and those typically given by USDA, Food and Nutrition Service (FNS). FNS recommends simpler and slightly more conservative food handling practices than does the FDA Food Code in order to build in an added measure of safety for the population served by the Child Nutrition Programs (CNP). School food service personnel can be assured that diligently following either set of recommendations, FNS or Food Code, will result in the service of safe food to children participating in the CNPs. To learn more about food handling ordinances applicable to your specific locale, please contact your city, county or State health department. The U. S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, nation- al origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer. This project was funded at least in part with Federal funds provided to the National Food Service Management Institute at The University of Mississippi from the United States Department of Agriculture, Food and Nutrition Service under grant number F33385. The contents of this publication do not necessarily reflect the view or policies of the United States Department of Agriculture, nor does mention of names, commercial products or imply endorsement by the United States Government. The National Food Service Management Institute at The University of Mississippi complies with all applicable laws regarding affirmative action and equal opportunity in all its activities and programs and does not discriminate against anyone protected by law because of age, color, disability, national origin, race, religion, sex, or status as a veteran or disabled veteran. National Food Service Management Institute, 2002. Copyright © 2002 National Food Service Management Institute Printed in the U.S.A. FIRST CHOICE A Purchasing Systems Manual for School Food Service

Second Edition January 2002 Authored by Marlene Gunn, MS, RD With Contributions by Carol Trefry, MEd

National Food Service Management Institute

The University of Mississippi P.O. Drawer 188 University, Mississippi 38677-0188 Phone: 662-915-7658 Fax: 662-915-5615

NFSMI Order Number EX59-02

United States Department of Agriculture Food and Nutrition Service Child Nutrition Division 3101 Park Center Drive, Room 1010 Alexandria, VA 22302 Phone: 703-305-1624 Fax: 703-305-2879 ACKNOWLEDGMENTS

This project was developed with input from many school meals practitioners from throughout the country. Their expertise and advice are gratefully acknowledged.

This project has been funded with Federal funds from the U.S. Department of Agriculture, Food and Nutrition Service under a cooperative agreement with The University of Mississippi, the National Food Service Management Institute. The contents of this publication do not necessarily reflect the views or policies of the U.S. Department of Agriculture, nor does mention of trade names, commercial products, or organizations imply endorsement by the U.S. Government. FIRST CHOICE TABLE OF CONTENTS

Chapter 1 Step by Step ...... Page 1

Chapter 2 The Regulatory Environment ...... Page 7 Chapter 3 The Market Place Environment ...... Page 29 Chapter 4 The Product Movement Process ...... Page 43 Chapter 5 Allocating Time Resource to Product Categories ...... Page 57 Chapter 6 Determining Bid Units ...... Page 63 Chapter 7 Developing Product Specifications ...... Page 69 Chapter 8 Brand Approval ...... Page 81 Chapter 9 Getting Ready to Obtain Prices ...... Page 101 Chapter 10 The Purchase System ...... Page 109 Chapter 11 Monitoring Cost ...... Page 137 Chapter 12 Laboratory Testing of Products ...... Page 151 Chapter 13 Receiving and Storage ...... Page 159 Chapter 14 Purchasing ...... Page 173 Appendices ...... Page 187 References ...... Page 285 Glossary ...... Page 289

v NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE TABLE OF CONTENTS

Appendices Appendix 1 Review of potential distributor vendor ...... Page 187 Appendix 2 School district purchasing profile ...... Page 193 Appendix 3 Market area analysis worksheet ...... Page 197 Appendix 4 Self assessment of warehouse cost ...... Page 199 Appendix 5 Stock level form ...... Page 205 Appendix 6 Order calendar form ...... Page 207 Appendix 7 Sample plan ...... Page 209 Appendix 8 Foods with standards of identity ...... Page 215 Appendix 9 Reading a food label ...... Page 223 Appendix 10 Classifying food products by brand approval type ...... Page 225 Appendix 11 Corporate/cooperative distributor buying groups ...... Page 227 Appendix 12 Sample letter for scheduling pre-bid conference ...... Page 231 Appendix 13 Pre-bid conference record form ...... Page 233 Appendix 14 Product comparison form ...... Page 235 Appendix 15 Sample protocol for screening new products or brands . .Page 237 Appendix 16 Standard contract language ...... Page 243 Appendix 17 Active school purchasing cooperatives ...... Page 253 Appendix 18 Nutrition label ...... Page 269 Appendix 19 Critical path form ...... Page 271 Appendix 20 Evaluating preparation instructions form ...... Page 273 Appendix 21 Internet reference list ...... Page 275 Appendix 22 Warehouse receiving temperature report ...... Page 279 Appendix 23 Warehouse receiving report ...... Page 281

Appendix 24 Food Safety Audit of Manufacturer ...... Page 283

vi NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE INTRODUCTION

The first edition of this reference was 6) Food procurement for Child written to provide child nutrition Nutrition Programs is performed in professionals with a resource to guide an ethical manner by qualified them in their procurement procedures. professionals. This edition updates procurement information and integrates food safety For the second edition of the manual a information to assist the purchaser in seventh principle was added. The seventh establishing procedures to assure the principle reads: receipt of a safe product as specified. 7) Food procurement is integrally related to food safety. These six NFSMI principles served as the basis for the first edition of the The material in the manual is manual. presented in four parts, which are: 1) Food procurement for Child Practice - a series of dialogues that Nutrition Programs occurs in a mirrors current practice; dynamic environment that Information - history, experience, and influences availability, cost, the opinions of other authors and peers; acceptability, and nutritive value of Summary - a brief review of the foods. material presented in each chapter; 2) This dynamic environment requires Tools - ready-made forms. continual evaluation of program needs, products, and food Whether purchasing for the private procurement methods. sector (such as restaurants) or the public 3) Food procurement is inextricably sector the process is the same. Public linked to the nutritious meals served sector purchasing has the added and to implementation of the dimension of accountability to taxpayers Dietary Guidelines for Americans. for the expenditure of funds. Accountability makes it more difficult to 4) Food procurement is integrally obtain the quality necessary for service to related to the our children. of Child Nutrition Programs. The implementation of quality 5) Food procurement decisions are improvement programs in school districts based on scientific information, has implications in the purchasing area. government regulations, cost, What do authors who write about quality product quality, customer demands, improvement recommend? One of them, and environmental constraints in W. Edwards Deming, wrote so powerfully order to provide nutritious and on the subject of quality that his 14 points acceptable meals to America’s for improvement in purchasing were used children. to establish the goals for this manual.

vii NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST INTRODUCTION CHOICE In public purchasing ways must be 12)Eliminate work standards . . . identified to accomplish the task that substitute leadership. allow application of Deming’s standards 13)Remove barriers that rob . . . for quality. Deming’s 14 points for quality employees of the right to pride of present some challenges for those workmanship. involved in purchasing in the public 14)Institute a vigorous program of sector. His points are presented below. education and self-improvement. 15)Put everybody in the company to 1) Create constancy of purpose toward work to accomplish the improvement of product and service. transformation. The transformation 2) Adopt a new philosophy. is everybody’s job. 3) Cease dependence on inspection to achieve quality. Deming stated so well the task before 4) End the practice of awarding purchasers that the quote verbatim is on the basis of price tag. included in this manual: Instead, minimize total cost. Purchasing managers have a new job. 5) Move toward a single supplier for Economists teach the world that any one item, on a long term competition in the market place gives relationship of loyalty and trust. everyone the best deal. This may have 6) Improve constantly and forever the been so in days gone by, when the baker system of production and service, to had his customers, the tailor his, the improve quality and productivity, cheese-maker his, and so forth. In those and thus constantly decrease cost. days, it was fairly easy to make an 7) Institute training on the job. intelligent purchase. It is different today. The price tag is 8) Institute leadership. The aim of still easy to read, but an understanding of supervision should be to help people quality requires education. and machines and gadgets to do a The purchasing department must better job. change its focus from lowest initial cost of 9) Drive out fear, so that everyone may material purchased to lowest total cost. work effectively for the company. This means education in purchasing. 10)Break down barriers between It is also necessary to learn that departments. People in research, specifications of incoming materials do design, sales, and production must not tell the whole story about performance. work as a team. What problems does the material 11) Eliminate slogans, exhortations, and encounter in production? targets for the work force asking for Materials and components may all be zero defects . . . the bulk of the excellent, each by itself, yet not work well causes of low quality and low together in production or in the finished productivity belong to the system and product. It is thus necessary to follow a thus lie beyond the power of the sample of materials through the whole work force. viii NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE INTRODUCTION FIRST CHOICE production process into complex compete for selection as the single supplier. assemblies, and onward, finally, to the A supplier should himself work toward customer. a single supplier for any one item. There was nothing wrong with the A second source, for protection, in case glass in a large building in Boston, nor ill luck puts one vendor out of business with the steel. Both met the specifications. temporarily or forever, is a costly policy. Yet somehow they did not work well There is lower investment and lower together in service. Glass windows fell total inventory with a single vendor than from the steel frames to the ground below. with two. In one instance, the man in charge of Japanese management had a head procurement of materials, in attendance at start in 1950 on the need to improve a seminar, declared that he has no incoming materials, and on advice to problems with procurement, as he accepts establish with every vendor a long term only perfect materials. working relationship of loyalty and trust. (Chuckled I to myself, “That’s the way Uncertainty about date of delivery and to do it.”) Next day, in one of his plants, a quality drives some customers to engage superintendent showed to me two pieces of two or three vendors in the hope that one a certain item from two different suppliers, of them will come through.” same item number, both beautifully made; both met specifications, yet they were Any school district or individual with sufficiently different for one to be usable, a vision to change the purchasing systems the other usable only with costly rework, a that support delivery of nutritious meals heavy loss to the plant. to children should read additional The explanation was that one supplier material from Deming. He has several understood what the blocks were to be books in print and each carries the same used for, the other did not he merely message related to quality and the impact satisfied the specifications. of purchasing. Advantages of a single source and long The challenge before us is to explore term relationship. A long term relationship opportunities in public purchasing to between purchaser and supplier is apply the Deming philosophy. We hope necessary for best economy. How can a you will approach the reading of this supplier be innovative and develop manual or the presentations as part of a economy in his production process when class with a flexible attitude. he can only look forward to short term business with a purchaser? Moreover, one should not overlook the simplification in the and paperwork due to decrease in number of suppliers and fewer shipping points. A worthy customer should expect his suppliers, if they are wise and looking ahead with constancy of purpose, to

ix NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE

FIRST CHOICE CHAPTER 1 Step by Step

urchasing decisions must be based Purchasing supports the primary goal of on the nutritional needs of chil- the Child Nutrition Programs, which is Pdren and support for the staff at “to protect the health and well being of the school site who are responsible for the nation’s children,” as stated in the food preparation and service. National School Lunch Act of 1946.

The steps in the purchasing function are as follows:

1. Plan menus. 8. Analyze market and evaluate vendors. 2. Determine products necessary to 9. Determine the purchasing system. produce menus. 10. Issue request for prices. 3. Estimate quantities needed. 11. Evaluate responses 4. Develop acquisition/critical path plan. 12. Make vendor selection. 5. Develop quality standards. 13. Place orders. 6. Determine product movement 14. Receive product. policies. 15. Store products 7. Document purchasing process. 16. Prepare meals

The person responsible for school operates, it must accomplish all purchasing is involved in all of these of the tasks. The resources available basic steps. Many other steps could be will determine the manner in which the added, but they are dependent on purchaser performs each task. Where variables and are not applicable to one person has the entire purchasing every situation. The school system may responsibility, inevitably some of the operate a single site with no support steps get more attention, while other from a central administrative unit. In steps are ignored. larger school districts the task may be The purchaser who simply places divided among several individuals. food orders contacts directly the sales Regardless of the setting in which the person who calls on the school by

1 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 1 CHOICE telephone or through some automated Other purchasing management method. However, placing food orders is professional organizations are the only one of multiple tasks involved in National Association of Purchasing the purchasing function. Managing the Management, whole process requires making National Contract Management decisions at each step in the purchasing Association, and the Purchasing process. Management Association of Canada. All The steps are the same whether of these organizations offer excellent purchasing for the private sector (such purchasing resources through their as restaurants) or the public sector. publication offices. A certification Public sector purchasing has the added program to become a Certified Public dimension of accountability to taxpayers Purchasing Buyer (CPPB) and a for how funds are used. Accountability Certified Public Purchasing Official can make it more difficult to assure the (CPPO) is available through these quality necessary for service to children. organizations. Planning menus, determining The American Bar Association products necessary to produce the provides a model procurement code that menu, storing products, and preparing states or local political jurisdictions can meals are steps outside the scope of adopt. The term model is used rather purchasing and therefore are not than the term code. ABA is committed included in this manual. The manual to a model (as opposed to a code) does present material on all the other because of the diverse steps. structures used by states and local government bodies and the differences in their procurement needs. Schools can PUBLIC PURCHASING purchase the 2000 ABA Model Procurement Code from ABA at GUIDELINES http://www.abanet.org/ or NIGP at Did you ever wonder http://www.nigp.org/. about a rule related to purchasing, such as having a Public Purchasing guidelines take signed original of a bid two basic forms: response? Public purchasing protocol is developed the Laws or regulations are issued by same as protocol for any profession. states or local jurisdictions, often Public purchasing professional based on the ABA model organizations and the American Bar procurement code. Association (ABA) take leadership roles in developing public purchasing models. Protocol, common law, common The National Institute of Governmental practice, or accepted practice are Purchasing (NIGP) is one public all terms used to describe the purchasing professional organization.

2 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STEP BY STEP FIRST CHOICE second form. These are based on The reputation of a school suffers the ABA model, the decisions of immeasurable damage when the public courts, and sometimes just the becomes aware of unethical behavior. recurring practices of purchasing Ethics must be considered as a moral professionals. These guidelines are issue. The actions of both public and not law or regulation but are private purchasers should be judged the considered an accepted way of same, but taxpayers expect higher doing business. ethical behavior from public sector employees. Ethics in purchasing Newspaper headlines clearly show that ethics create problems for both Some additional ethical issues to which public purchasers should school purchasers and industry pay close attention: partners. Such headlines as “Cafeteria manager indicted for mail fraud,” “XYZ allowing personality to enter into dairy company officials convicted of purchasing decisions, rigging school milk bids,” and “Schools giving preference to supplier based play favorites with food contracts” on long-term business indicate the depth of the problem. The relationship, amount of money spent and the giving preference to supplier based competitive nature of the marketplace on political connections, make it essential that school purchasers adhere to the highest ethical standards. obtaining proprietary information Questions related to ethics do not from one supplier and sharing it always have clear answers. A good with a competing supplier, and general rule: “If you question an action, accepting free trips and then you should not proceed.” entertainment.

The purchasing profession agrees Appendix 7 contains a sample these three actions are unethical procurement plan that can be used as a behavior: guide for managing the ethical issues related to purchasing. Ethics and providing one supplier’s cost Quality Public Purchasing by Stanley D. information to another supplier Semansky provides some thought- prior to supplier selection, provoking reading. This publication can accepting gifts or cash from a be purchased from NIGP. The ABA supplier, and model procurement code contains a showing preference to suppliers code of ethics that could be helpful in because of pressure from developing procurement procedures. management.

3 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 1 CHOICE Administrative hearing Identify the method for notifying procedures the protestor of the decision. Prospective vendors may protest a Notify the employees not to purchasing decision. Maintaining a proceed with the procurement procedure to resolve disputes is good until the decision is rendered. business practice. If a dispute can be resolved without legal action, the cost Establish an emergency procedure to both parties is reduced. The North if the service/product under American Free Trade Agreement and the protest is essential to daily World Trade Organization Government operations. Procurement Agreement require sub units of national government (state and Search the World Wide Web local governments) to maintain bid for state information. protest procedures. The school district, Many states maintain web sites that city, or county government probably contain state purchasing laws and has a procedure. Obtain a copy and regulations. States often have ethics become familiar with the procedure. If a guidelines, administrative hearing copy is not available, use the ABA 2000 procedures, and purchasing plans that model procurement code as a guide. can be used as models for developing local purchasing related documents. Below are some of the elements of an administrative hearing Understanding product terms procedure: To communicate with each other about products, both supplier and Identify the position to whom the purchaser must use and understand the protest should be addressed, same terminology. To communicate preferably an individual not with the reader, this manual must use involved in the day-to-day certain purchasing terminology that the purchasing activities. reader understands. However, the Specify the number of days after school segment of the food service an action that a potential vendor industry has no standard terminology has to enter a protest. for products purchased. The terminology used in this manual is Require that the protest be in standard in many segments of the food writing. purchasing industry. New terms are Ask the hearing officer to provide defined when first used and then used the decision in writing and state consistently in context. The glossary at the reason for the decision. the end of this manual also lists all Make sure the decision advises the terms used and defines each one. protestor of his right to an additional hearing or judicial review.

4 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STEP BY STEP FIRST CHOICE Summary The steps in the purchasing process are the same whether operating in the public or pri- vate sector. The resources available to school purchasers will determine whether they place food orders or manage the entire purchasing function. Each school district should have a purchase or acquisition plan. The plan outlines how purchasing for products will be implemented. The acquisition plan should contain a code of ethics and an administrative hearing procedure. Public purchasers are obligated to pay special attention to ethical issues related to employee conduct. Ethics must be considered as a moral issue, and many situations will arise for which there are no clear guidelines. A general rule of thumb: “If you question the activity, don’t do it.” The American Bar Association, in cooperation with professional purchasing associations, writes and publishes a model procurement code. This code serves as a guide when many state purchasing laws are written or revised.

5 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 1 CHOICE Notes

6 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 2 The Regulatory Environment cPractice The following dialogue between two school purchasers illustrates their feeling about the regulatory environment:

"The Robinson-Patman Act, 7 CFR Part 3016, the Food, Drug and Cosmetic Act, "I only purchase food for two small schools. the Nutrition Labeling and Education Why do I need to know about all of these Act, the Sherman Act, the Meat laws?"

Inspection Act, etc., etc., etc."

"Mary told me I didn't need to include "Well, I think 3016 is one of those drained weight in my descriptions for fruits USDA rules that you have to follow." and vegetables, that it is covered by

something called a standard of identity."

"I think that's right, but what bothers me is I don't know where you find "Let's put standards of identity reference copies of the standards of identity. I on our to-do list."

don't even know what they look like."

I've heard some school districts are requiring their distributors to submit What is a HACCP plan? HACCP plans.

7 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE A school purchaser must be a conform to combination of food technologist, applicable Federal law. business manager, nutritionist, lawyer, Maintain a contract administration and communication expert, along with system which ensures that having a working knowledge of several contractors perform in accordance other specialties. One of the purchaser's with the terms, conditions, and most complex but crucial areas of specifications of their contracts or expertise is the regulatory environment. purchase orders. Information Maintain a written code of The USA enjoys one of the safest standards of conduct governing the food supplies in the world. The laws performance of their employees and regulations required to achieve that engaged in the award and safe food supply are long and administration of contracts. complicated. School purchasers cannot Provide for a review of proposed expect to understand all of the food- procurements to avoid purchase of related laws. A realistic goal is to unnecessary or duplicative items. understand the basic purpose of each of Consider consolidating or breaking the laws, and know where to go for out procurements to obtain a more additional information when necessary. economical purchase. The challenge for all school purchasers is to understand the laws Where appropriate, an analysis and minimize the constraints. Taxpayers will be made of lease versus demand accountability. purchase alternatives and any other appropriate analysis to Child Nutrition purchasing determine the most economical regulations approach. To foster greater The regulations for school districts economy and efficiency, or individual schools implementing or schools/school districts are operating a procurement system are in encouraged to enter into state and Volume 7, Code of Federal Regulations. local intergovernmental The internet site http://www.nara.gov agreements for procurement or use contains the full text of the purchasing of common goods and services. regulations. Below is a review of some Make awards only to responsible components of these regulations. contractors possessing the ability to perform successfully under the Schools/school districts will: terms and conditions of a Use their own procurement proposed procurement. Give procedures which reflect applicable consideration to such matters as state and local laws and contractor integrity, compliance regulations, provided that the with public policy, record of past

8 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE performance, and financial and other factors to be used in technical resources. evaluating bids or proposals. Conduct procurements in a Ensure that all pre-qualified lists of manner that prohibits the use of persons, firms, or products which statutorily or administratively are used in acquiring goods and imposed in-state or local services are current and include geographical preferences in the enough qualified sources to ensure evaluation of bids or proposals. maximum open and free Write selection procedures for competition. Also, schools/school procurement transactions. These districts will not preclude potential procedures will ensure that all bidders from qualifying during the solicitations: solicitation period. (i) incorporate a clear and Conduct all procurement accurate description of the transactions in a manner providing technical requirements for the full and open competition. Some material, product, or service to be of the situations considered to be procured. Such description shall restrictive of competition include not, in competitive procurements, but are not limited to: contain features which unduly (i) placing unreasonable restrict competition. The requirements on firms to qualify to description may include a do business, statement of the qualitative nature (ii) requiring unnecessary of the material, product or service experience and excessive bonding, to be procured, and when (iii) noncompetitive pricing necessary, shall set forth those practices between firms or minimum essential characteristics between affiliated companies, and standards to which it must (iv) noncompetitive awards to conform if it is to satisfy its consultants that are on retainer intended use. Detailed product contracts, specifications should be avoided if (v) organizational conflicts of at all possible. When it is interest, impractical or uneconomical to make a clear and accurate (vi) specifying only a brand-name description of the technical product instead of allowing an requirements, a "brand name or "equal" product to be offered and equal" description may be used as describing the performance of a means to define the other relevant requirements of the performance, procurement, and (ii) identify all requirements which (vii) any arbitrary action in the the bidders must fulfill and all procurement process.

9 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE Be responsible, in accordance with Education Act (NLEA) of 1990, which good administrative practice and made several important changes in food sound business judgment, for the product labeling, was an amendment to settlement of all contractual and the Food, Drug and Cosmetic Act. The administrative issues arising out of Food and Drug Administration, (FDA) procurements. These issues part of the Department of Health and include, but are not limited to Human Services, is responsible for source evaluation, protests, administration of the legislation. disputes, and claims. The overriding purpose of the act is to protect the public health. The stated Maintain records to detail the purpose is to protect the public from significant history of their products not proven to be safe and purchases, including but not effective for their alleged uses and to limited to: safeguard public health by enforcement (i) rationale for the method of of certain standards of purity and procurement, effectiveness. (ii) selection of contract type, The reach of the act is broad, and (iii) contractor selection or rejection, the provisions touching the public and interest in a direct way are given a (iv) the basis for the contract price. liberal construction. The total scheme contemplates judicial obligation to enjoin distribution of unsafe foods even Chapter 10 provides additional in absence of formally promulgated information on the procurement regulation. regulations related to purchasing The law makes the following methods. Appendix 7 contains a contribution to the safety of our food sample procurement plan. A supply: procurement plan has two advantages: Prohibits the shipment in interstate The plan can clarify the commerce of misbranded food procurement practices of an SFA product. A food is misbranded if for the benefit of its staff. the label contains false or The plan can document the misleading statements. methods of procurement for the Prohibits the shipment in interstate products purchased. commerce of adulterated food products. A food is adulterated if it FOOD, DRUG, AND contains any harmful substance COSMETIC ACT that makes it injurious to health. Established definitions and The Food, Drug and Cosmetic Act standards of identity, standards of was enacted in 1938 and amended in quality, and standards of fill for 1990. The Nutrition Labeling and containers of food. 10 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE Standards of identity, quality, and fill (degrees Brix) with correction for for containers are in 21 CFR Part 100 of temperature to the equivalent at 20 the Food, Drug and Cosmetic Act degrees C (68 degrees F) is not less regulations. This information helps than 9 percent (exclusive of the school districts develop specifications/ solids of any added optional descriptions. The applesauce standard nutritive carbohydrate sweeteners) of identity is an example: as determined by the method prescribed in "Official Methods of Analysis of the Association of Official Analytical Chemists," 13th Ed. (1980), section 22.024, "Soluble Solids (by Refractometer) in Fresh and Canned Fruits, Jams, Marmalades, and Preserves--Official First Action" which is incorporated by reference but without correction for invert sugar, or other substances.

Definition Optional Ingredients (a)(1) Canned applesauce is the food (2) The following safe and suitable prepared from comminuted or optional ingredients may be used: chopped apples (malus domestica i. Water. Borkhausen), which may or may ii. Apple juice. not be peeled and cored, and which may have added thereto one or iii. Salt. more of the optional ingredients iv. Any organic acid added for the specified in paragraph (a)(2) of purpose of acidification. (Organic this section. The apple ingredient is acids generally recognized as heated and, in accordance with having a preservative effect are not good manufacturing practices, permitted in applesauce except as bruised apple particles, peel, seed, provided for in paragraph core material, carpel tissue, and (a)(2)(viii) of this section.) other coarse, hard, or extraneous materials are removed. The food is v. Nutritive carbohydrate sealed in containers. It is so sweeteners. processed by heat, either before or vi. Spices. after sealing, as to prevent vii. Natural and artificial flavoring. spoilage. The soluble solids content, measured by refractometer viii. Either of the following: and expressed as percent sucrose (a) Erythrobic acid or ascorbic 11 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE acid as an antioxidant preservative (a)(1) of this section, the name in an amount not to exceed 150 may include the word "sweetened." parts per million; or If no such sweetener is added, the (b) Ascorbic Acid (vitamin C) in name may include the word a quantity such that the total "unsweetened." vitamin C in each 113 g. (4 ounces) by weight of the finished Label Declaration food amounts to 60 mg this (4) Label declaration. Each of the requirement will be deemed to have ingredients used in the food shall been met if a reasonable overage of be declared on the label as required the vitamin, within limits of good by the applicable sections of parts manufacturing practice, is present 101 and 130 of this chapter. to insure that the required level is However, when ascorbic acid maintained throughout the (Vitamin C) is added as provided expected shelf life of the food under for in paragraph (a)(2)(viii)(b) of customary conditions of this section, after the application of distribution. heat to the apples, preservative ix. Color additives in such quantity labeling requirements do not apply. as to distinctly characterize the food unless such addition conceals damage or inferiority or makes the Fill of Container finished food appear better or of (c)(1) The standard of fill of greater value than it is. container for canned applesauce is a fill of not less than 90 percent of the total capacity of the container, Nomenclature as determined by the general (3) The name of the food is method for fill of containers "applesauce." The name of the prescribed in 130.12(b) of this food shall include a declaration chapter, except that in the case of indicating the presence of any glass containers having a total flavoring that characterizes the capacity of 192 ml (6 1/2 ounces) product as specified in 101.22 of or less, the fill is not less than 85 this chapter and a declaration of percent. any spice that characterizes the (2) Sampling and acceptance product. If a nutritive sweetener as procedure: A lot will be deemed to provided for in paragraph fall below the standard of fill when (a)(2)(v) of this section is added the number of "defectives" exceeds and the soluble solids content of the acceptance number "c" in the the finished food is not less than sampling plan. See "Sampling and 16.5 percent as determined by the Acceptance Procedure" 145.3(p) in method referenced to in paragraph General Provisions at beginning of 12 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE fruit standards. AQL for applesauce National Food Service Management is 6.5%. Institute. Call toll free, 800-321-3054. (3) If canned applesauce falls below Request the standard of identity by the the standard of fill of container product name and the number of the prescribed in paragraph code of Federal Regulations. Appendix 16, standard contract (c)(1) of this section, the label language, provides suggested wording shall bear the general statement of for incorporating into your school substandard fill specified in district bid documents or instructions 130.14(b) of this chapter, in the the standards of identity, fill of manner and form therein specified. containers, drained weights, and net The standards of identity for meat container quantity regulations found in products are in USDA regulations, 21 and 9 CFR. Volume 9 CFR, Part 300. An example of a standard of identity for meat can be Agricultural Marketing Act found on page 28. This act passed in 1953 and amended in 1957 orders USDA to create General Instructions various agencies to establish standards To avoid lengthy additions to and grades for food. USDA inspection is specifications and/or descriptions, a voluntary and self-supporting service school purchasers can incorporate of the Processed Products Branch, Fruit standards of identity and fill of and Vegetable Division, Agricultural container regulations in the general Marketing Service (AMS). Applicants instructions. may use this service for any product on School purchasers need to know and a service fee basis. The types of understand the details of standard of inspections available: identity regulations. 1) Continuous inspection: One or Understanding will allow school more inspectors are present at all purchasers to incorporate the standards times while the plant is in in bid/quote instructions, and to avoid operation. Inspectors check the wording in descriptions/specifications preparation, processing, packing that is in conflict with the standards. and warehousing of all products Appendix 8 lists foods for which under contract and assure standards exist. The standards are compliance with sanitary available at http://www.nara.gov/. The requirements. This inspection is standards issued under the Food , Drug available only in an approved and Cosmetic Act are in volume 21 CFR plant. and those issued under the Meat and 2) Designated lot inspection: Poultry Inspection Acts are in volume 9 Inspectors grade and certify only CFR, a copy of any standard of identity those lots designated in applicant's is also available through the contract. information clearing house at the 13 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE 3) Lot inspection: Specific lots of person in the nearest regional office: processed fruits and vegetables are inspected and graded where they Processed Products Branch are located plant warehouses, Fruit and Vegetable Division, AMS, USDA commercial storage, railway cars, Room 0709 South Building 14th Street trucks, or any other storage facility and Independence Ave S. W. or conveyance. Washington, D. C. 20250 Phone: (202) 720-4693 4) Approved plant lot inspection: Same as lot inspection, but the lot A list of the inspection offices and the is certified as produced in an contact information for each office is approved plant. This means the available online at plant facilities, sanitation, and http://www.ams.usda.gov. general operating procedures have been approved for certain This voluntary service has proved products. invaluable for purchasers of processed 5) Pack certification: Same as fruits and vegetables. The grade continuous inspection except the standards established by USDA are used inspector is not present at all throughout the industry for establishing times. quality standards. 6) Quality assurance contract: The standards of identity specify Inspectors use information what ingredients a product must available from the applicant's contain for the product to have a quality control records to certify specific name. The grade standards lots. Lots are graded at random as address quality issues such as color, often as necessary to verify the defects, and uniformity. reliability of the applicant's quality USDA quality grade standards control system. contain several general sections. Some of the topics covered are fill of The quality control program of container, drained weights, headspace, most private label packers is adequate syrup density, fill weights, lot to meet the quality standards of compliance and grade determination. school districts. Few school districts The regulations on grade standards are find it necessary to require grading in 7 CFR Part 52. The grade standards certificates for fruits and vegetables. for fruits and vegetables can be AMS maintains regional offices and accessed online at http://www.ams.usda.gov. close with state The standard of identity for canned agricultural agencies. Should the need applesauce was presented earlier in this arise for random testing of fruits and chapter. Now let's look at the grade vegetables, school districts could standard for applesauce. contact AMS headquarters at the address below, and ask for the contact

14 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE

UNITED STATES STANDARDS FOR GRADES OF CANNED APPLESAUCE (FIFTH ISSUE - EFFECTIVE MARCH 11, 1982)

Canned Applesauce as defined in the Standards of Identity for Canned Applesauce (21 CFR) issued pursuant to the Federal, Food, Drug and Cosmetic Act. COLOR TYPES: Natural color. (1) Color derived wholly from the apple ingredient.(2) Consideration is given to the color, if any, imparted by added spice or spices. Artificially colored. Color derived from an artificial color in substance as permitted in the FDA definition and standards of identity. FLAVOR TYPES: Natural Flavor. Flavor is derived from the apple ingredient and other permitted additives exclusive of flavorings or spices. Flavored. Flavor derived substantially from an added flavoring ingredient, including artificial flavorings. Spiced. Flavor is derived substantially from added spice or spices. TYPES OF PACK: Unsweetened. Without the addition of nutritive carbohydrate sweeteners. Test not less than 9 degrees Brix. Sweetened. With nutritive carbohydrate sweeteners added. STYLES: Regular (or comminuted). Comminuted into granular particles. Chunk (or chunky). Chopped into small pieces. DEFINITION OF TERMS: a) Absence of defects means the degree of freedom from particles of seeds, discolored apple particles, peel, carpel tissue, stamens, and other objectionable particles. b) Brix means the percent, by weight, of natural apple soluble solids and added sweeteners, if any, corrected to 20 degrees centigrade (68 degrees) Fahrenheit. c) Carpel tissue means the tough, sometimes hard and sharp tissue from the center portion (core) of the apple surrounding the seed cavity. d) Color means the color typical of the variety or varieties used in other than "spiced flavored" or "artificially colored."

15 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE

e) Consistency means the flow characteristic of the product and the degree of separation of free liquid. f) Discolored apple particles mean apple particles that are discolored by bruise or other means to the extent that they do not blend well with the normal color of the product and are noticeable. g) Finish means the following: the texture and tenderness of the apple particles; the evenness of the division of apple particles in regular (or comminuted) style; and the proportion of chunks or pieces of apples in relation to fine apple particles in chunk (or chunky) style. h) Flavor means the degree of excellence of the natural flavor and aroma of the apple ingredient; the apparent relationship of the acidity to sweetness; the freedom from undesirable flavors; and with respect to flavored and spiced types, the flavor balance of the apple ingredient in relation to the added flavor of spice ingredient(s). i) Peel means apple peel that does not blend well with the normal color of the product and is noticeable or that is tough whether or not is visually noticeable. j) Seed particles mean whole seeds or pieces of seed and portion of the core of the apple. k) Stamen means the dark hairlike substance from the blossom end of the apple.

GRADES OF APPLESAUCE U. S. Grade A is the quality of canned applesauce that: (1) Meets the applicable requirements presented below; and (2) Scores not less than 90 points. U. S. Grade B is the quality of canned applesauce that: (1) Meets the applicable requirements presented below and; (2) Scores not less than 80 points. Substandard is the quality of canned applesauce that fails to meet the requirements for U. S. Grade B. Color: Natural (Grade A score points 18 to 20: Grade B score points 16 to 17) Grade A - Bright, practically uniform, typical of variety or varieties used, no discoloration due to oxidation or scorching. Grade B - Dull, reasonably uniform, typical of variety or varieties used, slightly brown, slightly pink or slightly grey. Spice flavored Grade A - Characteristic of the color imparted by added spice. Free from discoloration due to oxidation or scorching. Grade B - The color imparted by added spice may be slightly affected by pink or grey color, but is not off color.

16 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE

Artificially colored Grade A - Bright and distinct Grade B - reasonably bright and distinct Consistency: (Grade A score points 18 to 20: Grade B score points 16 to 17) Product Flow: Grade A - not more than 6.5 cm (2.5 in) Grade B - not more than 8.5 cm (3.3 in) Free Liquids: Grade A - not more than .7 cm (.3 in) Grade B - not more than 1 cm (.4 in) Absence of defects; (Grade A score points 18 to 20: Grade B 16 to 17) Dark Stamens - Grade A is not more than 3, Grade B is not more than 5. Seed particles, peel, discolored apple particles, carpel tissue - Grade A not more than .5 cm total, grade B is not more than 1 cm total. Medium and dark colored particles - Grade A not more than .25 cm, Grade B not more than .5 cm

Finish (Grade A score points 18 to 20: Grade B score points 16 to 17) Grade A - Evenly divided, not lumpy, pasty, or salvy. Grade B - Evenly divided, slightly salvy or pasty. Flavor (Grade A score points 18 to 20: Grade B score points 16 to 17) Grade A - Good natural sugar acid balance. Grade B - reasonably good natural sugar acid balance. Analytical: Brix unsweetened - Not less than 9.0 degrees for both grades. Brix sweetened - not less than 15.5 degrees for Grade A and 14.5 degrees for Grade B.

17 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE The USDA marks products that the The processed products branch also agency inspects and grades during provides voluntary services related to packing. All 15 styles of label fresh fruits and vegetables. In 1999 designations are either in a grade shield AMS, Fruit and Vegetable or are labeled packed or inspected by Program's Qualified the U.S. Department of Agriculture. The Through Verification shield may or may not contain the (QTV) service was grade assigned to the fruit or offered to producers vegetables. Below are some examples of of minimally the label designations. processed fruits and vegetables. Under QTV, AMS reviews and assesses a firm's documented HACCP-based food safety PACKED UNDER QTV plan. After a plan is found to meet CONTINUOUS QTV program requirements, AMS uses INSPECTION onsite audits to determine the suitability OF THE of a firm's implementation of its plan. U. S. DEPT. OF If precut or value added produce is AGRICULTURE produced in a plant that meets the requirements of the QTV program and the company has an ongoing contract with AMS for inspection, the product may be marked with the QTV label. If a school district is purchasing processed fresh fruits and vegetables from a pre-cutter that does not use the services of the QTV program, AMS offers two other services that would be of value to a school district. One is a plant survey, which is performed once a year and assesses a processor's compliance with Good Manufacturing Practices (GMP's). The second service is a Plant Systems Audit (PSA). This includes a review of the sanitation conditions at the time of the audit. The QTV program, plant surveys, and plant systems audits are voluntary services and fees are charged for the service. Voluntary Federal inspection for animals not covered under mandatory inspection (i.e., buffalo, rabbit, reindeer,

18 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE elk, deer, antelope) is also handled The Meat Inspection Act under the Agricultural Marketing Act. The purpose of this act was to that request voluntary insure a high level of cleanliness and inspection must pay an hourly fee for safety of meat products. Congress in the service. passing this Act focused primarily on dangers presented by the sale of Poultry products inspection unwholesome foods, but the authority laws to promulgate standards of identity was The Poultry Products Inspection Act conferred to prevent economic of 1957 and the Wholesome Poultry adulteration, the erosion of food Products Act of 1968 established integrity and the sale of products compulsory federal inspection of all inferior to those that the consumer poultry moving across state lines and in expected to receive. (21 U.S. Code) foreign commerce. In 1968 the act was The regulations implementing broadened to require that state this act are very broad. standards be at least equal to federal Summarized below are items that standards. are important to school The Congressional declaration of purchasers. policy for these acts reads "It is hereby All meats sold in interstate declared to be the policy of the commerce shall be inspected for Congress to provide for the inspection wholesomeness. of poultry and poultry products and otherwise regulate the processing and Meats shall not be manufactured distribution of such articles to prevent containing harmful substances. the movement or sale in interstate or Meats shall not be labeled in a foreign commerce of, or the burdening false and deceptive manner. of such commerce, by poultry products which are adulterated or misbranded." Meats shall be processed in a (21 USC, 451 and 452) clean and sanitary manner. All meats shall be labeled with the federal inspection circle of wholesomeness. Uniform standards shall be established for state and federal meat inspection.

19 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE All meat products will have the receiving process. The provisions of the establishment number of the Meat Inspection Act and the Poultry manufacturing facility in which the Products Inspection Act are the product was converted to the form in responsibility of the United States which it is sold in the inspection mark. Department of Agriculture. Below are School purchasers should look for this examples of the three types of establishment (est.) number to identify inspection marks the way the marks the manufacturer of a product when appear, from left to right, on processed approving brands or during the meat, on raw poultry, and on raw meat.

20 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE HACCP/Pathogen Reduction at which the potential hazard can Rule be controlled or eliminated. HACCP (Hazard Analysis Critical Examples are cooking, cooling, Control Point) is a management system packaging, and metal detection. in which food safety is addressed Establish preventive measures through the analysis and control of with critical limits for each biological, chemical, and physical control point. For a cooked food, hazards from raw material production, for example, this might include procurement and handling, to setting the minimum cooking manufacturing, distribution and temperature and time required to consumption of the finished product. ensure the elimination of any The HACCP/Pathogen Reduction Rule is harmful microbes. covered by the following federal regulations: Establish procedures to monitor 9CFR Part 304, 308, 310, 320, 327, the critical control points. Such 381, 416, and 417. For successful procedures might include implementation of a HACCP plan, determining how and by whom management must be strongly cooking time and temperature committed to the HACCP concept. A should be monitored. firm commitment to HACCP by top Establish corrective actions to be management provides company taken when monitoring shows employees with a sense of the that a critical limit has not been importance of producing safe food. met. For example, reprocessing or Listed below is a description of the disposing of food if the minimum HACCP program and the seven steps for cooking temperature is not met. implementation. Establish procedures to verify that the system is working HACCP involves seven principles: properly. For example, testing time Analyze hazards. Identify and temperature recording devices potential hazards associated with a to verify that a cooking unit is food, and the steps or measures working properly. needed for control. The hazards Establish effective record keeping could be biological, such as a to document the HACCP system. microbe; chemical, such as a This would include records of toxin; or physical, such as glass or hazards and their control methods, metal fragments. the monitoring of safety Identify critical control points. requirements, and action taken to These are points in a food's correct potential problems. Each of production from its raw state these principles must be backed by through processing and shipping sound scientific knowledge: for to consumption by the consumer example, published microbiological

21 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE studies on time and temperature National Marine factors for controlling foodborne Fisheries Service, a pathogens. division of the Federal Department Food Irradiation of Commerce. These Food irradiation is a process in voluntary services which products are exposed to radiant include plant energy including gamma sanitation inspection, rays, electron beams, product inspection and grading, lot and x-rays in inspections, HACCP (Hazard analysis amounts approved critical control point)-based inspection by the Food and program, and laboratory analytical Drug Administration. services. The PUFI seal on seafood is Irradiation is only part of the sanitation inspection of the one of many processes National Marine Fisheries Service. A that can be used to prevent foodborne seafood product with the PUFI seal illness. It is not a substitute for good means the manufacturer has taken manufacturing practices. Establishments advantage of the voluntary plant that use irradiation must meet the same sanitation inspection. An example of the sanitation and processing standards PUFI seal is pictured on the right. required by all meat and poultry plants. USDA/FSIS oversees the irradiation of Public Health Service Act raw meat and poultry. U.S. Public Health Service (PHS) Food is irradiated to make it safer. It activities in the area of food protection can reduce the risk of foodborne illness began at the turn of the century with by destroying harmful bacteria, parasites, studies on the role of milk in the spread insects, and fungi. Irradiation does not of disease. These studies lead to the destroy all pathogens, but it does reduce conclusion that effective disease their number. Meat and poultry that has prevention requires the application of been irradiated must be properly labeled. comprehensive food sanitation measures The Radura symbol must be on the label from production to consumption.. Next, of packages of product where the entire PHS developed model codes to assist content was irradiated. state and local governments to initiate For additional information on and maintain effective programs to irradiation see USDA/FSIS consumer prevent foodborne illness. publication online at Today, FDA maintains an updated http://www.fsis.usda.gov. Model Food Code to assist food control jurisdictions at all levels of government. Fish and Wildlife Act The code provides a scientifically sound The Fish and Wildlife Act of 1956 technical and legal basis for regulating provides for a voluntary seafood the retail segment of the food industry. inspection program operated by the The retail segment includes those

22 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE establishments or locations in the food English name of the country of origin of distribution chain where the consumer the food. takes possession of the food. The term "ultimate purchaser" is The Model Food Code is neither defined in the Customs Regulations as federal law nor federal regulation and is the last person in the United States who not preemptive. Rather, it represents will receive the article in the form in FDA's best advice for a uniform system which it was imported. A processor of regulation to ensure that food at the who converts or combines an imported retail level is safe and properly article into a new product one having protected and presented. a new name, character, or use is Providing Model Food Codes and considered the "ultimate purchaser" of Model Food Code interpretations and the imported article. Such new products opinions is the mechanism through are considered to have undergone which the FDA, as lead federal food "substantial transformation" and are control agency, promoted uniform excluded from marking. implementation of national food An imported product that has only regulatory policy among the several been repackaged must be marked with thousand federal, state, and local the name of the country of origin of the agencies and tribes that have primary product. On every food container and responsibility for the regulation or shipping container bearing a U.S. name oversight of retail level food operations. and address, the customs regulations The most recent Model Food Code is require that the name of the country of available online at http://www.fda.gov/. origin appear "in close proximity to" and "in at least a comparable size" as The Tariff Act the U.S. name and address, preceded by The Tariff Act of 1930 related to "Made in," "Product of," or words of import foods. According to the Almanac similar meaning. of the Canning and Freezing Industry, U.S. Customs Service has 1993 edition, the Food, Drug, and determined that imported fruit juice Cosmetic Act does not require a concentrate used in the production of statement of the country of origin on concentrated or reconstituted fruit the label of imported foods. This is a juices is substantially transformed in requirement of the U.S. Customs processing and blending in the United Service under the Tariff Act. The States with other batches of concentrate regulations for this act are in 19 CFR. of the same fruit, and that marking is Every container of food of foreign required on single fruit juices and origin imported into the United States concentrates containing the imported must be marked in a conspicuous place concentrate. as legibly, indelibly, and permanently as the nature of the container will permit. The Antitrust Laws The label shall indicate to the ultimate The antitrust laws are the Sherman purchaser in the United States the Act of 1890, Clayton Act of 1914,

23 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE Federal Trade Commission Act of 1914, Large price changes involving and the Robinson-Patman Act of 1936 more than one seller of similar (an amendment to the Clayton Act). products of different brands, When these laws are effectively and particularly if the price changes responsibly enforced they can save are of equal amount and occur at school districts millions of dollars a year the same time. in illegal overcharges. Most states have A seller stating, "We can't sell to antitrust laws also. These laws prohibit you; according to our agreement, business practices that unreasonably so-and-so (the seller's competitor) deprive all consumers (schools and the is the only firm that can sell to general public) of the benefits of you." competition. Violations of antitrust laws often result in higher prices for inferior Fewer competitors than normal products and services. submitting bids on a project or Indictments in recent years related to product. several products (milk, bread, and Competitors submitting identical poultry) have alerted school purchasers bids. to the importance of the antitrust laws. The same company repeatedly the Price-fixing and bid-rigging conspiracies low bidder and getting contracts for are, by their nature, secret and therefore a certain service or a particular area. difficult to detect. Law enforcement officials rely on complaints and Bidders appearing to win bids on a information from consumers and fixed rotation. competitors. An unusual and unexplainable Price-fixing and bid-rigging large dollar difference between the conspiracies are most likely where there winning bid and all other bids. are relatively few sellers to conspire together. More sellers means more The same bidder substantially competition and usually better prices. higher on some bids than on School purchasers should be alert to others, with no logical cost reason any of the signs of price fixing and bid to explain the difference. rigging. Some examples of these practices: These signs are by no means conclusive evidence of antitrust Any evidence that two sellers of violations. Trained investigators are similar products have agreed to necessary to determine if an actual price their products a certain way, violation has occurred. However, these to sell only a certain amount of may be indications of a violation. The their product, or to sell only in Federal Trade Commission and Justice certain areas or to certain Department would like to hear about customers. any signs of potential bid rigging or price fixing.

24 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE You can call or write these agencies rigging. Below are the basic purposes of at the following locations: each of the acts: The Sherman Act outlaws all Antitrust Division, Department of contracts, combinations (mergers and Justice buyouts), and conspiracies that 10th St. and Pennsylvania Ave. NW unreasonably restrain interstate trade. Washington, D. C. 20530 This includes agreements among Phone: (202) 633-3543 competitors to fix prices, rig bids, and allocate consumers. The Sherman Act This agency maintains field offices also makes it a crime to monopolize in Atlanta, Georgia; Chicago, Illinois; any part of interstate commerce. An Cleveland, Ohio; Dallas, Texas; New unlawful monopoly is when only one York, New York; Philadelphia, firm provides a product or service, and Pennsylvania; and San Francisco, it has become the only supplier not California. because its product or service is Consult the local phone directory for superior to others but by conduct that the number of any of these field offices. suppresses competition. The Act is not Federal Trade Commission violated simply because one firm's 6th St. and Pennsylvania Ave. NW vigorous competition and lower prices Washington, D. C. 20580 take sales from its less efficient Phone: (202) 326-2222 competitors. Sherman Act violations are http://www.ftc.gov punished as criminal felonies. The Clayton Act is a civil statute This agency maintains field offices (carries no criminal penalties). The in Atlanta, Georgia; Chicago, Illinois; Clayton Act prohibits mergers or Cleveland, Ohio; Dallas, Texas; Los acquisitions that are likely to lessen Angeles, California; New York, New competition. A key provision of the York; San Francisco, California; and Clayton Act authorizes private parties to Seattle, Washington. Consult the local sue for triple damages when they have phone directory or the FTC web site for been harmed by violations of either the the number of any of these offices. A Sherman or Clayton Acts. complaint can be filed online with the The Robinson-Patman Act (an FTC at http://www.ftc.gov. amendment to the Clayton Act) prohibits certain discriminatory prices, It will take time to get answers to services, and allowances in dealings your questions. Violation of the between merchants. Under certain antitrust laws is a criminal offense, and circumstances, the Act prohibits a seller all complaints must be investigated. from granting lower prices to favored The investigation is detailed and time buyers, whether the price consuming. These agencies can help discrimination is instigated by the seller school purchasers with long-term or forced upon the seller by the buyers. solutions to potential price-fixing or bid- The Act does not make all price

25 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE discrimination illegal. Certain defenses in interstate commerce but carries no are provided, such as if discounts are criminal penalties. Even if a particular made to meet competitors lower prices. practice does not violate the Sherman, The Act imposes criminal sanctions for Clayton, or Robinson-Patman Act, it certain practices and for sales at may still violate the FTC Act. The FTC unreasonably low prices if the purpose Act is used to prevent violations of both is to destroy competition. the specific antitrust laws and the The Federal Trade Commission Act public policy expressed in those laws. prohibits unfair methods of competition

Summary Residents of the United States enjoy the safest food supply in the world. The link between food laws and specifications is important to the school purchaser. School pur- chasers should know the laws in general, their purpose, and where to find additional information.

Department of Commerce - The Fish and Wildlife Act provides for labeling of seafood with the PUFI (Packed Under Federal Inspection) seal.

Health and Human Services - The Food, Drug and Cosmetic Act controls the labeling of food products and contains the federal standards of identity for food. The 1990 amendment updated the nutrition labels on foods.

The Public Health Service Act gives the Public Health Service authority to create model food codes for use by all levels of government to impact the safety of food served at the retail level. Retail level includes schools.

United States Customs Service - The Tariff Act of 1930 covers the labeling of import- ed foods

United States Department of Agriculture - Child Nutrition Purchasing Regulations: 7 CFR regulate purchasing under a federal grant and apply to purchases with school nutri- tion funds.

HACCP/Pathogen Reduction Rule: A management system that addresses food safety through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement, and handling, to manufacturing, distribution, and consumption of the finished product

26 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE REGULATORY ENVIRONMENT FIRST CHOICE The Agricultural Marketing Act created the standards for processed fruits and vegetables. The USDA operates a voluntary grading service and maintains quality grade standards for processed fruits and vegetables and other products..

The Meat Inspection Act and Poultry Products Inspection Act established the inspection program that ensures meat products sold in interstate commerce are wholesome. All meat crossing state lines is labeled with an inspection mark and contains the number of the establishment where the product was manufactured.

The Antitrust Acts - The purpose of the Sherman, Clayton, Robinson-Patman and Federal Trade Commission Acts is to maintain open and free competition in the market place.

27 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 2 CHOICE

Volume 9 CFR Part 319.15 Miscellaneous beef products

(a) Chopped beef, ground beef. "Chopped beef" or "ground beef" shall consist of chopped fresh and/or frozen beef with or without seasoning and without the addition of beef fat as such, shall con- tain not more than 30 percent fat, and shall not contain added water, phosphates, binders, or extenders. When beef cheek meat (trimmed beef cheeks) is used in the prepara- tion of chopped or ground beef, the amount of such cheek meat shall be limited to 25 percent; and if in excess of natural proportions, its presence shall be declared on the label, in the ingredient statement required by 317.2 of this subchapter, if any, and otherwise contiguous to the name of the product.

(b) Hamburger. "Hamburger" shall consist of chopped fresh and/or frozen beef with or without the addition of beef fat as such and/or seasoning, shall not contain more than 30 percent fat, and shall not contain added water, phos- phates, binders, or extenders. Beef cheek meat (trimmed beef cheeks) may be used in the preparation of hamburger only in accordance with the conditions prescribed in paragraph (a) of this section.

(c) Beef Patties. "Beef patties" shall consist of chopped fresh and/or frozen beef with or without the addition of beef fat as such and/or seasonings. Binders or extenders, mechanically separated (species) used in accordance with 319.6, and/or partially defatted beef fatty tissue may be used without added water or with added water only in amounts such that the product characteristics are essentially that of a meat patty.

(d) This section of related to fabricated steak and is omitted from this text.

(e) Partially defatted beef fatty tissue. "Partially defatted beef fatty tissue" is a beef byproduct derived from the low temperature rendering (not exceeding 120 degrees fahrenheit) of fresh beef fatty tissue. Such product shall have a pinkish color and a fresh odor and appearance.

28 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 3 The Market Place Environment cPractice The private conversations of manufacturer and distributor sales staff can teach school purchasers a lot about the failed communication process between schools and our business partners. The conversations below are typical:

"Our brand is not approved. "Go on and bid. They won't notice." We can't bid."

"It's discouraging to work on this bid. It's hard to tell what they want, and I "Why does doing business with schools have know our brand is better than our to be so difficult? Why can't they be like restaurants?"

competitor's."

"There really isn't a lot of difference. All "There's no reason for us to waste our time of the steps are the same, except they filling out this bid. They are going to have to issue formal request for prices purchase from the same vendor they

because they are spending dollars." always use."

"Maybe we will get lucky and they will get mad at that vendor." "But next time they'll get mad at us, and we'll lose the business."

29 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE A general breakdown in Information communication between school The food distribution chain has purchasers and the business community become increasingly complex over the has caused a lot of confusion about years. To make wise decisions a school school business. Both schools and purchaser must understand the role of employees of our business partners each player who has an effect on the must make an effort to understand each quality of the product or service. An other. understanding of the players who take ownership of and liability for product should be considered when making purchasing decisions. The four players in the center of the chart below most often own the product. The flow chart shows the place of all of the players.

Food distribution chain from grower to school

30 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE Grower is the individual, , The broker is paid a fee by the or that actually grows the manufacturer, based on the dollar value product. The location where the of products sold. The actual sale of the product is grown can affect the product product is from the manufacturer to the quality. distributor. A broker's activities usually Manufacturer or processor is the firm include: that converts the raw product to a Selling product to the distributor further processed state. Several Assisting distributors in obtaining manufacturers or processors may be prices and contracts for products involved in converting to the form purchased by schools. Packer is another Placing or tracing orders term for the manufacturer or processor. Assisting with problem resolution Government agencies protect the safety between the manufacturer/ of the food supply. The Food and Drug processor, the distributor, and the Administration (a branch of the US end user of the product (that is, Public Health Service), the USDA, and the school) the Environmental Protection Agency Providing training for the are among the regulatory agencies. See distributor's sales force the chapter on the regulatory environment for a discussion of their Distributor buying groups/corporate critical role. These agencies work in headquarters are purchasing groups cooperation with industry trade formed by independent distributors or associations to establish generally corporate groups. These groups accepted manufacturing practices. maintain a private label for identity Broker or sales representative is the purposes, provide product quality person or firm employed to sell the control support, marketing, and other manufacturer or processor's products to assistance to local distributors. the distributor. Manufacturers may hire Distributor, wholesaler, jobber, or an employee to sell their product to a dealer is the company that purchases distributor, or they may hire a product, sells it to customers, and brokerage firm as their sales delivers the product to schools. A representative. A broker will represent distributor is a professional at food or sell the products of several purchasing, warehousing, sales, and manufacturers. The broker or delivery of a perishable product. manufacturer's sales representative also Distributors can be classified in the makes sales calls on school districts, following categories: restaurants, or other distributor customers. Full or broadline means that they carry almost all food, supply, and equipment items necessary to operate a kitchen. The typical distributor can carry in

31 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE inventory (stock) in excess of 7,000 had sales of $14.25 billion. Special products. breed distributors are discussing Broadliners account for $73.9 billion diversification of their customer base. or 48% of the $154 billion in 1999 food When a restaurant chain sells or files service distributor sales. for bankruptcy, the special breed The ten largest distributors had sales distributor may lose a significant of $41.1 billion or 31.4 percent of the portion of its business volume. Schools total distributor sales. should be aware of special breed distributors as potential new vendors. Specialty wholesalers are companies that specialize in a particular product Supermarket or wholesale clubs are in category. Some examples of specialty every community. Many small wholesalers are meat companies, residential centers participating in the produce companies, paper companies, National School Lunch and Breakfast and dry grocery companies. Milk and Program purchase product at these bread companies are specialty locations. The disadvantage is that distributors and manufacturers. purchases are cash and carry. However, the product is not delivered, so the Special breed price is competitive. distributors are companies School/district purchasing co-op that deliver administrator is the chief operating products to officer for a group of school districts national that formed a purchasing cooperative. restaurant School districts form cooperatives for chains on a many of the same reasons that rigid structure. distributors formed cooperatives. These special End user is the school district that breed purchases and serves the product to the distributors final customer, the child. An end user delivered more also can be a cooperative purchasing than 13 group, representing the member percent of the schools. overall $154 billion in food A little bit of history service sales Food distribution has become a in 1999. The sellers' market. Understanding how this ten largest came about will help purchasers independent evaluate their purchasing process. systems distributors

32 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE Vendors or distributors serving the wholesale customers. school market were originally In the early '80s corporate mergers established to provide supplies for and buyouts gobbled up many small wagon trains journeying westward. That distributors. Though less common, market dried up, but meanwhile mergers continue to change the face of families began to grow less of their the food distribution business. The food. As they purchased more food specialty and independent distributors from the local grocery, the vendors don't have high visibility, but they developed this emerging market. continue to deliver as much as 50 In 1946 when the National School percent of the food sold to wholesale Lunch Act was passed, schools became customers. the first major wholesale customer for distributors. Early distributors served both the retail (grocery store or supermarket) and the wholesale business. Following the end of World The specialty and War II, two major changes affected the independent distributors food distribution business: don't have high visibility, 1. Major national chains bought the retail stores that were originally but they continue to deliver local "mom and pop" operations. as much as 50 percent of These chains built warehouses and operated their own fleet of trucks. the food sold to wholesale This change decreased the distributor's customer base. customers. 2. For the next 20 years the eating- away-from-home index (people eating out in restaurants and During the '50s schools were the public facilities) grew rapidly. This primary customer of wholesale change boosted the professional distributors. Schools represented as foodservice distributor's customer much as 75 to 80 percent of the base. available customer base; it was a buyers' market. In the business climate As the restaurant and health care of the early '60s and '70s distributors market base increased, the products understood the value of schools as necessary to service these accounts customers. began to change. In the late 1960s and The business climate has changed. early '70s distributors began to Schools that learn more about how the specialize in either retail or wholesale other customers do business will have customers. Today it is unusual for a the edge. The current customer base distributor to sell to both retail and looks something like this:

33 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE Restaurants ...... 40% quantities of product on a frequent Convenience stores (C stores) . . . .10% basis. Schools can request pricing from Hotels/lodging ...... 10% manufacturers based in all fifty states. Other commercial ...... 10% To take advantage of the competition at Health care ...... 10% the manufacturer level a school must be large enough to purchase in truck loads School foodservice ...... 10% and have a mechanism for delivery. Colleges and universities ...... 4% Successful purchasing depends on Correctional foodservice ...... 4% understanding business partners' Other non-commercial ...... 2% perspective. Read a distributor-directed publication such as ID: The Voice of The figures show that schools no Foodservice Distribution. A distributor's longer enjoy the luxury of a buyers' representative will have a current copy market. In a sellers' market, schools you could borrow to preview. This must compete with other customers and publication is free to employees of their methods of purchasing. Schools distributors, but there is a charge to can sell themselves to potential others. The January 2001 subscription distributor vendors, based on the rate was $105.00. They can be contacted following points: at P. O. Box 1254, Skokie, IL 60076-9201, Schools are not sold nor is or by phone at 847-647-7987, or Email business lost through new [email protected]. The web page can be ownership. accessed@ http://www.restaurantbiz. Schools do not file for bankruptcy; com/id/index.shtml. payment is guaranteed. Distributor vendor evaluation Yes, schools have to obtain School districts can better competitive prices, but will work understand their potential distributor to make the process fair. vendors if they visit the warehouse Schools prefer delivery early in the facilities and review operating week whereas commercial procedures. The review should cover accounts demand the later part of the following areas: the week. Product line Schools do not require deliveries Physical facilities on major holidays; vendor Delivery equipment and truck employees get the day off. loading procedures (including truck loading software) Although it has become a sellers' Financial history market at the distributor's level, it remains a buyers market at the Service levels manufacturer's level. The manufacturer Accounting practices does not have to deliver small Performance at pre-bid conferences

34 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE Appendix 1 contains a form for Facts about how products are reviewing a potential distributor's screened operation. Information on evaluating Sales call policy manufacturers during the brand approval process will be discussed in Special requirements for food Chapter 8. Some purchasing products professionals review vendors after the bid is awarded. Others claim that A blank form for developing a profile responsible purchasers should know for your school district is in Appendix 2. something about the potential vendor before making a recommendation. Many Technical information sources states do not have laws that require Since distributors typically stock routine inspection of distributors' 7,000 plus items, the sales staff can facilities. A school district has a only have a general knowledge of the responsibility to determine that product stock. The best source of descriptions of is coming from a clean storage facility. processed food products is the food manufacturers' technical staff. This is the communication chain: A school district has a The school is the distributor's customer. The distributor is the manufacturer's responsibility to determine customer. Manufacturers cannot go that product is coming from directly to the schools without cutting the distributor out of the chain, risking a clean storage facility. damaging professional relations. However, the school can request assistance, and the manufacturer will School district profiles gladly provide access to their technical Developing a school district profile is staff. one method that will improve To avoid increasing the communication with the business manufacturer's operating cost, school community. A purchasing profile tells districts can identify products on which vendors how your school district runs they need assistance, and make one its purchasing. The profile will help request. Schools can work cooperatively vendors know how to work with you. on product comparisons without Organize the purchasing profile in a actually forming a purchasing short, easy-to-read format. The cooperative. purchasing profile should contain five If this is your first main elements: attempt to access the S manufacturer's technical about the district staff, how do you start? Request for prices 1) Make a list of those products on which you need assistance.

35 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE 2) List the manufacturers who make try to maintain a balance between free this product. competition and what is best for the 3) Attend a trade association show to child. Communication with the vendor make contact with a manufacturer. community is essential to success. You must structure requests for prices so all 4) Request technical assistance from vendors have an opportunity to the manufacturer in writing. compete, but not at increased cost or at the expense of quality. Case histories Communicating with vendors explain the types of controversy in Controversy often develops as you which schools get involved.

CASE 1: A QUALITY ISSUE

A school district decided to serve children the best food available within budget constraints. Applying the philosophy to product quality, the school district specified whole fillets of fish, rather than a chopped and formed product. One local manufacturer of fish products had an excess inventory of chopped and formed product. This manufacturer decided that the local school system would be a good place to sell this product. When the Child Nutrition purchaser told the processor that the district had decided to serve only solid muscle product, the manufacturer demanded to know who had the bid. As the bid award is public information, the school district allowed the manufacturer to review the product and price information. The rather aggressive sales person informed the district that it was wasting taxpayers' money purchasing solid muscle product for $1.75 per pound when he could sell them the chopped and formed product for $1.05 a pound. The school district tactfully thanked him for the information and reinforced their decision for product quality. This aggressive sales person escalated the disagreement to the school purchasing department. The Child Nutrition purchaser explained the rationale for the decision, and the school purchasing department supported the decision. The escalation moved to the school board. Once again the Child Nutrition purchaser explained and actually served the school board both types of product. The school board supported the decision of the Child Nutrition office. The vendor then decided to report this "waste of taxpayers' money" to the state auditor. The facts became somewhat twisted, and the state agency had to investigate. The school district maintained its position, and the state determined that the district had the right to make quality decisions and had made a fair decision. It would have been easy for the Child Nutrition purchaser to give up. School purchasers must be prepared to face such situations and do the right thing for the children.

36 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE

CASE 2: QUOTES DOWN AND COSTS UP

A school district was getting fewer and fewer price quotes, and the cost of food was rising. The food service director decided that conversion to a bottom line bid award would guarantee vendors a cost-effective drop size. With this change more vendors agreed to offer prices. A small specialty distributor heard "through the grapevine" that he would no longer be able to bid. The food service director was prepared for this controversy and communicated with the vendor, using the market area analysis as shown in Appendix 3. The vendor agreed that the district was making the responsible decision for the children. He saw that he still had an opportunity to compete for the business.

CASE 3: VENDOR EVALUATION

A school district was considering purchasing pre-cut fruits and vegetables. The food service director and staff met to discuss the pros and cons of purchasing ready to eat product. Food safety was the biggest concern. They decided a inspection of the distributor was a necessity. In this particular case, the vendor was also the manufacturer of the produce. Did the vendor have a HACCP plan? What controls were in place to monitor appropriate temperature? Was the facility clean and sanitary? Using the HACCP Supplier checklist in Appendix 1, and the Physical Audit form in Appendix 23 the food service director was able to communicate the needs for a safe and wholesome product to his vendor.

Conducting a market area analysis On the next page is an example of a market area analysis for a school district with 20 food preparation sites and an annual food budget of $1 million.

37 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE Market Area Analysis Worksheet Classify potential distributors as broadline or specialty. Check with nearby schools or districts to locate potential additional vendors.

1. Broadline vendor

2. Specialty Vendors

When conducting a market area any items you may need. Grouping analysis for the purpose of converting products is important to them only to to a bottomline bid it is not necessary determine the drop size, guarantee to consider the broadline vendors. implied. Broadline vendors can offer prices on

3. Review specialty vendors' history of sales to the school district

38 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE 4. Determine the potential dollar value of the products on which broadline and specialty vendors might offer a price = $990,000.

Time saving tip: The total to bid on every item that they stock. food budget, minus milk, The purpose of conferring with vendors ice cream, bread and fresh is to find food groupings that give the produce provides a fast, school the most competitive price, reasonable estimate of makes the business attractive to more this number. vendors, and allows vendors the opportunity to compete. Discuss with each potential vendor the numbers obtained in steps The purpose of conferring with 2, 3, and 4. Show vendor vendors is to find food groupings that the prior year sales to the school district. Explain give the school the most competitive that you want to group the new bid to allow vendors price, makes the business attractive to compete for more to more vendors, and allows vendors business than they have received in the past, but the opportunity to compete. that they may not be able

5. Determine which vendors have common product lines

39 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE 6. Determine the dollar volume estimate for vendors with common product lines

During the conference to discuss bidder. If the numbers for your school steps 2, 3, and 4, obtain a copy of the are typical the dollars in the meat group product list from each vendor. will be the largest. It may be necessary Determine the common products to move some meat/frozen items to the stocked by all vendors in each group that only the broadline distributor identified category. Estimate the can bid on. potential dollars of business using the Allowing the meat/frozen vendors to quantities projected and the current bid on everything they stock at the price. expense of the cost paid for the remaining items is the point at which 7. Determine the dollars left the school must balance the needs of unclassified children against the open and free a. Record the total potential dollar competition issue. If the numbers for value from #4 above: $990,000 your school are typical this vendor will b. Subtract the potential dollar value probably have the right to compete for for specialty distributors =$ more business than he has received in (you complete) the past and should therefore be accepting of the grouping.

8. Make the final product grouping Communicating with specialty decisions distributor All groups should represent The purpose of the conference is approximately one third of the total in to develop product groups that will order to provide the most cost effective serve the best interest of the delivery "drop" size to each potential school district.

40 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE MARKETPLACE ENVIRONMENT FIRST CHOICE An individual conference with industry average is between $50 each vendor will be more effective. and $100. Mention at this cost level that it would take a $500 to Do not tell the specialty distributor $1,000 order for them to realize a how the final proposal will be profit. Show the specialty structured. distributor what they can expect Request the cooperation of the their total dollar volume to be, specialty distributor in determining based on your suggested product how to group items so that he groups. will be able to bid, and at the Discuss the implications on the same time protect the interest of prices for the remaining items if the school children and taxpayers. they are allowed to select the items From the report above share with on which they bid. the specialty distributor the following numbers: Compare the previous year's sales to this year's potential sales based 1. Total anticipated dollar value on the school district groups. of the proposal 2. Total dollar volume of Inform each specialty distributor business with this distributor that when all conferences have in the past year been completed a management 3. Average dollar volume per decision will be made as to final delivery during the past year product groups. Tell distributors for this distributor that you will advise them of the final decision and will seek to Discuss the current cost per arrive at a decision that will be delivery and mention that it is most beneficial to all concerned. your understanding that the

Summary The food distribution chain has become increasingly complex over the years. The situation has changed from a buyers' to sellers' market. Schools are no longer the dominant market segment and must learn to sell themselves as customers. Communication failure is the major source of controversy between the vendor community and the schools. Vendors and schools must make extra efforts to understand the demands of each other's role. Schools must adapt where possible to the methods used by the commercial segment.

41 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 3 CHOICE Notes

42 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 4 The Product Movement Process cPractice Terminology can create a communication barrier. Have you ever heard a conversation like this?

"What is your product movement "Do you know what she is talking about?" process?" L

"We run an education facility, not a "Those people in the administrative office manufacturing business!" must stay up at night thinking of ways to make it harder for us to order food." L

"I order the same number of bags of whole wheat flour every week. With The last bags of flour appeared to be water those fancy computers you would think stained. I wonder if the warehouse has a they could keep up with it and order leak somewhere. Do you think it's still okay

for me." L to use the flour?

43 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE How would you react to the question The number of times inventory is about your product movement process? turned per month is a major cost factor If you don't know or don't think it in food service operations and is critical applies to you, you are typical of most to cost control. Let's look at an school food service management staff. example: The typical food service operation needs from 500 to 1000 items of food, ABC school serves 500 students equipment, and supplies to operate, but lunch and breakfast. The monthly food fewer than one percent have a well purchases cost $1,500. If the school developed policy on product movement. district has an inventory turns policy of How do those 500 to 1000 items get two times per month, then at no time to the food preparation site? Whether to would the inventory in this school operate a warehouse or contract for kitchen exceed $750 ($1,500 divided by delivery directly to the site is 2 = $750). If a site receives once per controversial. How much inventory to week delivery, a seven day inventory maintain (number of days of food and should be adequate. A quick and supplies) creates even more controversy. accurate formula for establishing the Most operators inherited a method of dollar amount for a seven day inventory product movement management. Given is presented below. no opportunity to evaluate the system, they continue to operate "the way (Annual food purchases / Number of we've always done it." days meals served {180 approximately}) x 7 = Seven day inventory INFORMATION Food service distributors, seeking When developing a product more efficient operation at lower cost, movement policy, two options are are increasing product inventory turns. available: In the commercial sector almost all 1. Operate a warehouse owned or restaurants operate on seven to nine leased by the school district. days inventory, which converts to 36 inventory turns per year. Most 2. Have product shipped direct to the distributors have a goal of 24 to 30 food preparation sites. inventory turns per year. High volume items must be turned much more If you choose product delivery direct frequently to compensate for those low to the food preparation site, then you volume items which have a longer must decide delivery frequency: dwell time in the warehouse. L Just in Time (JIT), which could Restaurants, food service distributors, mean once a week or more often. and school food service must have well L If not JIT, then how much organized purchasing systems to inventory will be maintained? maintain cost-effective inventory turns.

44 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE In the commercial segment The advantages of JIT decides if food preparation movement: sites are allowed to invest cash in food L Reduced inventory inventory with no cost control limits. L School site managers should expect Reduced cost management direction on the amount of L Reduced paper work inventory that is acceptable. The value of the food and supply inventory is a An option to JIT is to maintain a major component of cost control. larger inventory for a longer period of time at the food preparation site. The amount of storage available and the School site managers cash available for inventory investment should expect management will affect this decision. With a JIT order system you don't direction on the amount of have costly man hours maintaining an inventory control system. If you inventory that is maintain a month or six weeks of acceptable. inventory, you may need a perpetual inventory record to control product usage. Don't confuse the frequency of But what about donated food? food deliveries with the product Although you can't control order movement policy. It is possible to have placement or delivery schedules, a weekly food delivery and maintain an donated foods represent only about 25 inventory in excess of weekly needs. percent of school food needs. You can't Plan product movement so that a use one-fourth as an excuse to avoid a stable number of cases is ordered each positive product movement policy for delivery. If you order 100 cases one the other three-fourths of items used. You can establish an objective to make the best use of the delivery system Plan product movement so available in your state. A majority of the schools in this that a stable number of country move product JIT-just in time. cases is ordered each JIT means that the product arrives at the school just in time for food delivery. preparation. The cost of daily delivery is not practical; however, weekly week, 200 cases the next week, and 50 delivery is feasible. JIT is not an option cases the third week, the distributor is for some schools in Alaska that face constantly having to modify truck some unusual weather problems routes. Erratic ordering adds to affecting product movement. distributor's cost and eventually

45 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE increases the price you pay for product. important to document these standards In 1998 sixty eight percent of to verify that food safety is a priority in distributors reported a minimum order your establishment. These standards are size. The average minimum order was cleanliness, FIFO (product rotation), $250.00. The average size of a street time and temperature and appropriate order was $459.00 and for a program packaging. order was $1,496.00. A street order is an order taken through a sales person. Cleanliness: Storage areas should be The order can be taken on the phone, cleaned on a regular schedule. This but most often is taken in person during include floors, walls, shelves, a sales call. The distributor refrigerator/freezer gaskets, trays, carts management has determined the upper and other equipment. Cleaning supplies and lower limits (may or may not and other chemicals should have their reflect distributor cost) within which own separate storage away from food the product will be sold, the sales storage and food contact areas. person makes the decision about pricing for each individual customer. A FIFO - First in first out: Properly label program order is based on a contract and date each product so that the older between the distributor and the items are used first and the newer customer. Program orders are most products are placed behind for future often placed over the phone or use. The age of the product is based on automatically via computer. the pack date from the manufacturer, A warehouse operation increases not the receipt date. Train employees to the cost of managing inventory. Each shelve items in this manner and check school district must determine the cost expiration dates. of operating a school warehouse before making an informed decision about Time and temperature: It is essential product movement policy. See Appendix that food not be held in the temperature 4 for an approach to costing warehouse danger zone (41- 140 degrees F) for operations. The ability of the school more than four hours (cumulative). district to organize the movement of This includes the time for receiving, products with the purchasing process preparing, transporting, cooling, affects school site delivery vs reheating and serving the food. Also warehouse operation. A well designed check temperature and humidity levels inventory control system is necessary of storage areas, including refrigerators, with a warehouse operation. freezers, and dry storage. An additional consideration which accompanies a school run warehouse, Appropriate packaging: Keep food in central kitchen, large storeroom and the clean, original wrap when possible. If delivery vehicles is the safety of the packaging becomes dirty, re-wrap in food. In these settings, a few standard clean, food-grade material, label the food safety principles apply. It is contents and the date it was stored. In

46 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE high roach problem areas, it may be Sample forms for documenting these preferable to remove cardboard box storage guidelines are located in shipping containers as a roach control Appendix 22 and 23. method. Practice c The product movement process of most school districts creates a lot of additional work for food preparation site managers. Purchasing departments and/or food service administrative offices issue order deadlines giving little thought to the impact on the site manager. Often a manager who completes a weekly order for food has to go through a thought process that goes something like this:

Step 1 - The menu for the week of 9/15 calls for this product. Step 2 - The inventory of this product is: Step 3 - This much of this product is on order for delivery tomorrow: Step 4 - This much of this product is on order for delivery next week: Step 5 - This is on the menu 9/3, and we will use XX number of cases.

The site manager has to add, subtract, add, add, and subtract: five mathematical calculations repeated for some 60 items every week. The excessive lead time imposed on most managers also makes it very difficult to establish standard stock levels for items used on a repetitive basis. A standard stock level is the number of units of a product that should be kept on hand. Standard stock level is also called build to levels, or, par stock levels. With two orders in The excessive lead time transition, what you have in imposed on most managers inventory compared to the also makes it very difficult to established stock level is only 50 percent of establish standard stock the equation. levels for items used on a repetitive basis.

47 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE

Can you identify with the school food service employee who might have made each of these comments? I "School A forgot to order brown sugar again." I "You would think she could get the order right for something she uses over and over." I "Those people in purchasing got mad at me again for forgetting brown sugar. I wish I had a nice desk job with no interruptions while I was ordering." I "I am concerned about what we are preparing for lunch today, and they expect me to worry about my grocery order for three weeks from now! They can just call back after lunch is served." I "The distributor will be here for his orders at 1 p.m., and Mrs. Smith has not called in her order yet." I "The garbage disposal has backed up again, that state monitor came for breakfast, and the central office is calling because my order is late. I just need to get lunch served today. I'll worry later about my grocery order for week after next." I "The teachers have a work day on Tuesday week after next, and that is my regular grocery delivery day. Wonder if I will get a delivery?"

Most site mangers must operate under a product movement policy that is not well defined, and they have few tools to make the job more efficient. In most school districts a single day of the week is established as orders-due date without considering what day food is delivered to a particular site. Many administrators take the position that, "We always place all orders on Friday," and see no need for an order placement calendar. Computers are gaining widespread use for meal counts, but rarely are they available to improve the product movement process. Technology used mostly in accounting and meal counts could prove invaluable in product movement, as you will see later in this chapter.

48 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE MENU SYSTEMS 3. Those items that vary, based on the planned menu. The menu system determines the food and supply items that must be The menu system will determine the available daily. category into which a product fits. As A school uses one of the following an example a school that offers a grilled menu systems: chicken sandwich every day would place grilled chicken and bread on the L A single preplanned menu standard stock list. Another school that L A cycle menu offers that same grilled chicken once every other week on a planned menu L A menu that changes daily with would put grilled chicken and bread on choices that remain the same the menu-as-planned list. If honey L Some variation of these mustard is offered as the dressing on this and other sandwiches and lettuce is The food and supply items separate on the sandwich and is also used for into three types. An effective product other purposes, those two items might movement policy must address the be standard stock items in both schools. purchase and delivery of each of these The following exercise gives practice types of product: classifying food by product movement 1. Those items used repeatedly, that type. can be placed on a standard stocking level. Remember, the answer should be 2. Those items used in small based on your menu system. quantities and ordered only once or twice per year.

49 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE

50 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE

Product Stock Date Product # Level 1/5 1/12 1/19 1/26 2/2 2/9

Individual catsup 10 cases ✔ 9 1 5 5 Individual mustard 3 cases 2 1 2 1 1 2 Individual mayonnaise 1 cases 1 1/2 1 1/2 ✔ Dill pickle 1 - 1 0 ✔ 1 0 5 gallon Salt 15# Pepper 2# Sugar 50#

Directions: Fill in amount on hand in shaded box. Put quantities to order in box left of shaded box. Post standing orders in the order box before copying the form.

Establishing standard stock form to develop a standard stock level levels ordering system. A blank of this form is Set an established amount (standard provided in Appendix 5. stock level) for items that are used In this example the cafeteria repeatedly to guide the manager as to manager orders on Wednesday, the when to re-order. Site managers who stock level for individual catsup is 10 have ordered food and supplies for cases, so on 1/5 the manager counts years would tell you that writing down what is in the storeroom, and it is more when to reorder is unnecessary paper than 10 cases, so the manager puts a work. However, experts in product check mark in the shaded box. On 1/12 management have proved that one case is in stock, so the manager establishing standard stock levels helps records the order as 9 cases in the order control inventory. A standard stock level box. ordering system also maintains What elements are necessary to continuity in delivery of services to establish build to stock levels if this is a children when the person who usually new process for a school? The invoices places orders is off from work. There is for the previous year and delivery a base of data from which a new person frequency are the most important pieces can make quantity decisions. Use this of information. Invoices show a pattern 51 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE of the amount ordered each delivery. The stock level for this item would Add 50 percent for a safety factor in be established as follows: case the order is delayed. As an example, if the review of invoices August through December - 5 x 1.5 reveals 2/100# of whole-wheat flour (safety factor) = 7.5 or 8 used per week, then add the safety In this example the manager would order factor of 50 percent and establish enough to bring the stock level to 8. standard stock level at 3/100# bags. If a January through March - 7 x 1.5 major change in menus is planned it (safety factor) = 10.5 or 11 will be necessary to base stock levels In this example the stock level would be on use projections. The historical established at 11. information does not reflect menu changes. The next example shows Developing the appropriate stock another factor which must be level for an item also is based on considered when establishing standard experience. If the number established stock levels. The stock level may have the first time is too high or low, you to be changed, based on the season. simply modify until you reach the workable number. Most site managers Example: This school offers fresh who order repeatedly can tell you from fruit daily as a choice. They always memory the amount they order each include fresh oranges. A review of week. If you are fortunate to have this invoices reveals: type of experience, just write down the 9/3 - ordered 5 cases amounts and verify for several weeks. 9/10 - ordered 6 cases Remember that standard stock levels 9/17 - ordered 5 cases are efficient because you never have to (The pattern stayed repeat the task once it is completed. the same until after Annual maintenance of stock levels Christmas holidays.) takes very little time. 1/3 - ordered 5 cases 1/10 - ordered 9 cases Simplify standard stock levels 1/ 17 - ordered 7 cases with standing orders Establishing standing orders can In this example, guess what simplify an ordering system for product happened. The quality of oranges in that is ordered each week. Pre-printed some regions of the country improves order forms with standing orders reduce about December, and students selected order preparation time by as much as them more often. The week after the 25 to 50 percent. To increase or holiday the school did not have oranges decrease amounts, simply mark through to offer for a choice on Friday. So they and insert the new amount. Standing over ordered the next week and then a orders programmed into an automated pattern began to develop. system will appear each time a site record is accessed.

52 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE factor for distributors, so their objective Establishing standing is to make maximum use of the equipment. Distributors say that it takes orders can simplify an $1 million in business to pay for each ordering system for product delivery truck. You can make your needs more attractive if you don't that is ordered each week. require that distributors reorganize routes when you are not at school on a scheduled delivery day. Ordering low volume items Many of the products in a food Many of the products in a preparation kitchen are purchased only once or twice a year because volume is food preparation kitchen so small. The exercise earlier in this are purchased only once or section identified examples of these twice a year because products. Most schools maintain these items on the bid or price quote list for volume is so small. the entire year, and each site orders these items whenever they choose. A In the commercial segment managers cost effective product movement policy are trained to receive their delivery no would be to establish one or two weeks matter when it arrives. Some chain a year for ordering these products. restaurant managers will tell you that You could get a separate bid for they receive deliveries routinely at 10 these items, with a firm price effective p.m. The two options available to a for only one week. This product school district that does not have sites movement policy can reduce the typical open on a school holiday: food list by as many as 50 items. High 1) Have staff meet the truck to volume concentrated in one delivery, receive the regular delivery. In compared to low volume for 18 or 20 school districts with less than 10 deliveries, is cost effective. sites, have one employee follow the truck from site to site and When school is closed on receive all deliveries. delivery day 2) Order extra the Most school districts' calendars …it takes contain a lot of weeks when students week before and $1 million in skip a delivery on a business to pay do not attend school a full week. School for each districts should consider not ordering school closing day. delivery truck. when school is out on the regular The product delivery day. To reduce cost schools movement policy should follow the rule of placing as few should reflect the restrictions on delivery as possible. decision of your Delivery equipment is a major cost district. 53 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE Order Placement Calendar

Order placement calendars technology makes possible a product If you make the cost-effective movement process that works decision, you should develop an annual something like this. order placement calendar for the school 1. Delivery day is Wednesday. district. All bids should reflect the 2. Site manager places the order on policy of the district. See Appendix 6 Monday and transmits via modem for a blank form. The form when to central administrative office. completed would look something like 3. Central administrative office the following page. (purchasing or food service) The lead time to process orders for approves the order and transmits JIT delivery should be limited to two to appropriate contract distributor days in advance of delivery. No school on the same day or overnight. should have to place an order while a 4. The contract distributor verifies previous order is in transition (placed, "in stock" of the order against the but not delivered). Every school in a inventory and notifies central district does not have to place orders on administrative unit of any out-of- stocks on day 2. No school should have to 5. Later in day 2 the central place an order while a administrative unit makes any necessary decisions about reorders previous order is in transition and, if necessary, places a second (placed, but not delivered). order. The receiving report is then transmitted to the school site. the same day. There is no increase in 6. On day 3 the school site receives the work load if the central processing the order. office devotes one hour per day to this 7. On day 4 the school site begins process for five days as opposed to five work on the next order. Note that hours in one day. Modern computer there is no order in transition.

54 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PRODUCT MOVEMENT PROCESS FIRST CHOICE When ordering items for a planned number of mathematical calculations menu (the third type on page 49), we the site manager must make. Let's need to step outside our routine and ask repeat the site manager's ordering steps why we think we have to order for a when technology supports the product Monday-through-Friday week. The size movement process. of the inventory could be reduced by as much as three or four days for those Step 1 - The menu for the week of sites that have a Tuesday through Friday 9/15 calls for this product: delivery day. Example: if a school has a Step 2 - The inventory of this product Tuesday delivery day, the week should is: be Thursday through Wednesday. Too many things can happen to delay a All the manager has to do is subtract delivery, so it is wise to maintain in to know how much to order. If we refer stock the items for the menu one day to the example on page 47, the effective after scheduled delivery. To stop the use of technology in the product thought process of "Monday through movement process reduces the number Friday is a week," let's look at the of mathematical calculations by 240. We whole week. went from five to one calculation per item - a reduction of four. The typical L Monday delivery day - order for site orders 60 items, 60 x 4 = a 240- Wednesday through Tuesday step reduction. L Tuesday delivery day - order for Thursday through Wednesday L Wednesday delivery day - order for Friday through Thursday L Thursday delivery day - (you complete) L Friday delivery day - (you complete)

Applying the advantages of modern technology to the product movement process reduces the

55 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 4 CHOICE

Summary Cost-effective management in a food service operation requires an efficient product movement policy. The policy should include the following elements: L A product movement method - warehouse, JIT, or site inventory L Products classified by product movement type L Standard stock levels for repeated use items L Standing orders for many standard stock level items L Twice-a-year order dates for low volume items L Lead times that avoid orders in transition L Effective use of technology to improve product movement L Order calendars that communicate the delivery plan L Food safety considerations when storing food (cleanliness, FIFO, time and temperature)

56 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 5 Allocating Time Resources to Product Categories cPractice

Does this conversation sound familiar?

"The last bid we opened was a real "How much do you spend a year on Italian nightmare. We had over 300 items and spice mix?"

one of the vendors complained about the specification for Italian spice mix."

"There isn't enough time to develop detailed specifications for every item. I am very "The last report indicated we spend $30 concerned about the fat content of the a year." ground turkey we purchase."

"You just have to put your priorities on "Maybe someday we'll have a full-time staff items that have the greatest impact on member to work on purchasing. It's not the nutritional well being of students." that specifications for spices are not

important, there just isn't enough time for everything."

This conversation could take place very difficult, and dealing with daily between school purchasers in any crises is likely to take priority. Other location in the United States. duties often leave little time to devote to Accountability takes a lot of time when developing specifications, which is not a you are getting so many Federal dollars. daily task. Establishing task priorities can be The saying, "The squeaky wheel

57 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 5 CHOICE gets the grease," applies here. In the Milk specifications are not difficult purchasing market the product with the as they are normally based on state strongest sales representation probably definitions for various types of fluid gets the time allotted to developing milk. All school purchasers should specifications. The sales staff, rather maintain a reference copy of their state than the school purchaser, establishes milk regulations. priorities for products. The importance of quality produce to meals which meet the Dietary INFORMATION Guidelines makes the seven percent Whether working in a large district spent on fresh produce a top priority. with a full-time purchasing specialist or The specifications for produce are not a single site where staff has little time difficult to develop. Excellent reference for purchasing, there is never enough materials on fresh produce standards time to research and develop are available. All schools should specifications. School purchasers must maintain a fresh produce reference. The have a priority list so they know on difficulties associated with buying fresh which items they spend the most produce are related not to specifications money. but to the choice of purchasing system, delivery, and receiving. Establishing realistic time allocations The first step to establish for meat and all other dry, frozen, and refrigerated items is the most difficult. time priorities is to review This area represents 200 to 300-plus expenditures by product items. A listing of expenditures by line item might look something like this categories. example: French fries ...... $103,059 The first step to establish time Pizza, sausage ...... 81,944 priorities is to review expenditures by Nuggets, chicken ...... 49,518 product categories. The 1996/97 USDA Beef patty, precooked ...... 38,425 school food purchase study indicated Chicken patty, breaded ...... 38,188 the following approximate percentages Chicken patty, grilled ...... 38,002 by product category: Orange juice, 4 oz portion . . . . .36,029 Peaches, sliced, canned ...... 21,526 Milk and other dairy products . . . .25% 65% of dollars and 20% of items Bakery ...... 10% Pizza, Mexican ...... 19,111 Fruits and fruit juices ...... 10% Frankfurters ...... 19,066 Vegetables ...... 10% Corn, whole kernel ...... 16,969 Prepared Foods ...... 10% Pineapple, tidbits ...... 13,415 Red meats ...... 10% Corn on the cob, frozen ...... 13,080 Poultry ...... 10% Juice, mixed blend, 4 oz portion .11,204 Other ...... 15% 80% of dollars and 35% of items

58 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ALLOCATING TIME RESOURCES TO PRODUCT CATEGORIES FIRST CHOICE Beans, green, canned ...... 10,496 The 1996/97 USDA school food Broccoli, spears, frozen ...... 10,286 purchase study indicated a great Juice, apple, 4 oz portion ...... 9,758 diversity in the food items purchased. Pears, canned halves ...... 8,924 The school districts participating in the Applesauce, canned ...... 8,505 study purchased 842 different items. In Potatoes, dried, granules ...... 7,774 this study ten food categories Beef, Salisbury steak ...... 7,591 representing less than 7 percent of the Corn dogs ...... 6,732 items accounted for nearly 50 % of the Potatoes, rounds, bite size ...... 6,298 value of purchases. Fluid milk, pizza, Danish pastry ...... 5,524 ground beef, cheese and potato French fries, oven-ready ...... 4,719 products (frozen and chips) were the Chicken strips ...... 4,593 five leading food categories. Green peas, canned ...... 4,512 The objective is comparability on all Beef patty, raw ...... 3,850 items purchased, but that goal is not Breaded fish portion ...... 3,824 Tomatoes, canned ...... 3,367 possible in most schools. Just as quality Ham, chopped or diced ...... 2,909 parameters are identified on a product, Beans, with pork or vegetarian . .2,641 the manufacturing technology changes Pork, BBQ ...... 2,493 and the specification must be revised. Blueberry muffins ...... 1,719 By using time available on items that Turkey, deli sliced ...... 1,519 claim the majority of budget, the school Eggroll, vegetable ...... 1,293 district staff establishes priorities rather Tomato paste ...... 1,250 than allowing the marketing sales force Cinnamon-apple muffins ...... 1,044 to establish priorities. Biscuits, frozen ...... 682 Classifying foods in the following TOTAL ...... $621,839 for 39 items categories reduces the amount of time devoted to quality standards: The typical list would contain some 280 to 300 items costing many more 1) One ingredient products. Examples dollars. For the purpose of this example are sugar, flour, salt, and fresh only the top 39 items are listed. Rule of produce. Some of these products thumb: "80 percent of the dollars are have more than one ingredient but spent on 20 percent of the items." the descriptions required for purchase are simple and easy to Rule of thumb: "80 percent develop. As an example saltine crackers contains several of the dollars are spent on ingredients, but the research required and the approach to the 20 percent of the items." description is similar to a one ingredient product. The Standards of Identity for the majority of

59 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 5 CHOICE these foods have been in place for 1) One ingredient - Plain foods are many years. commonly bid as "Distributors 2) Products that contain one major Choice," meaning the distributor can ingredient and seasoning choose the brand to bid or quote. ingredients. Canned and frozen 2) One major ingredient - Group 2 fruits and vegetables are in this foods are usually purchased as classification. These products are "Private Label." Most canned and packed under corporate/ frozen fruits and vegetables cooperative private labeling approved for purchase are Private programs with consistent Label. The chart in Appendix 11 standards. identifies acceptable brands and 3) Multiple ingredient products. Such may be used in quote or bid highly processed products account documents. for about 65 percent of the food 3) Multiple ingredient - Processed budget. Quality varies among foods usually are approved by brands, and quality control can be "Manufacturer's Brand." a problem within the same brand. On the following page is a product The way products are classified list by brand approval type. Remember generally reflects the way they are that there are no right or wrong ways to approved, bid, and purchased. categorize products. The objective is to Chapter 8 contains further reduce the time it takes to develop information on brand approval. quality standards. Based on your purchasing experience categorize the products on the chart on the next page for your school district.

60 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ALLOCATING TIME RESOURCES TO PRODUCT CATEGORIES FIRST CHOICE

61 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 5 CHOICE Appendix 10 contains a form for classifying the products purchased in your district. Base your decision on the The school district in this experience you have had with various example also took products. The objective is to move as many products as possible to the advantage of Distributor's "Distributor's Choice" and "Private Choice approval to Label" list to reduce the time you must devote to developing detailed maximize cost savings. specifications and quality standards. It is possible that the distributor will choose to bid Private Label on many of the Distributor's Choice items. Brand approval to provide the This time-saving approach to distributor maximum flexibility to establishing quality standards was purchase much more effectively. In the applied to one bid with 410 food and example above the distributor can supply items and produced the increase the number of Private Labels following results: bid by offering the Private Label on many of the Distributor's Choice items. Distributor's Choice ...... 56% The information on how the bid award Manufacturer's Brand ...... 27% actually broke down was not available. Private Label ...... 17% The school district in this example also The school district limited the took advantage of Distributor's Choice number of items with Manufacturer's approval to maximize cost savings.

Summary

School food service programs require technical expertise in diverse areas. Developing food specifications is only one of many tasks that require special attention. Daily tasks take so much attention that developing specifications is postponed until there is not ade- quate time to research all food products. School purchasers should develop a working policy of how to allocate time to the various products to be purchased. Two common rules will be of assistance: (1) Divide products by (a) dollars spent and (b) by the impact on the quality of the meal. (2) Allocate the limited time available to those products that are highest priority in one of these two categories.

62 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 6 Determining Bid Units cPractice How often have you heard a conversation like this?

"We opened bids this morning and three companies bid different brands "Was there much difference in the price?" for chicken nuggets."

"The range was from $18 to $35 per "Did all of the cases have the same number case." of servings per case?"

If your school or district office is INFORMATION independent from the Board of Education bid policies, this problem can A bid unit is the unit upon which be managed. If a purchasing department the vendor is to offer a price. A bid unit determines the format of your bids or request for price quotes, you may have to convince the purchasing agent that A bid unit is the unit upon food is different from other which the vendor is to offer . Purchasing food and supplies would a price. be so much simpler if product packaging were similar. The differences should be a common denominator for in packaging are more common for food all approved brands and should be in than for other supplies purchased for the best interest of the children. Let's school districts.

63 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 6 CHOICE look at some examples. What is the common denominator? Pound. 1. Green beans Brand A - 6/#10 In this example the description would Green beans Brand B - 6/#10 not specify a pack size, and the Green beans Brand C - 6/#10 bid unit would be pound. What is the common denominator? Consider if you would accept a case Case. weight greater than 20 pounds. If the answer is no, you might want In this example, we would put "6/#10 to add in the description per case" in the description of the "maximum case weight 20#." item, and "case" in the bid unit column. 4. Breaded chicken patties 2. Corn, w/k, frozen Brand A - 20# Brand A 3.2 oz - 2 oz meat/meat alternate Corn, w/k, frozen Brand B - 20# Brand B 3.3 oz - 2 oz meat/meat Corn, w/k, frozen Brand C - 20# alternate What is the common denominator? Brand C 3.5 oz - 2 oz meat/meat Case. alternate When choosing this bid unit, would Is the common denominator a pound you accept a substitute of 12/3# or a serving that is, "each"? per case? A pound bid unit gives an advantage If the answer is yes, the description to the vendor with the smaller would read "12/3# or 20# patty. An"each" unit is to the acceptable," and the bid unit advantage of the children. Each would be changed to "pound." plate will contain one patty If the answer is no, the description regardless of the size. would read "20# only" and the bid In this example the description would unit would be "case." not have a case count, but would Substitute packaging normally is not read "to be CN labeled to provide considered with 6/#10 products 2 oz meat/meat alternate per because an industry standard has serving," and the bid unit would been established for most items. read "each." As more companies begin stocking If there are products on the market pouch pack product, you may have smaller than 3.3 oz that provide 2 to specify "6/#10 only," if that is oz meat/meat alternate, the your choice. description might read, "minimum patty size 3.3 oz." 3. Ground beef - 10# Ground beef - 15# 5. Mustard, portion pack Brand A - Ground beef - 20# 200 per case

64 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DETERMINING BID UNITS FIRST CHOICE Mustard, portion pack Brand B - product, the appropriate choice is 500 per case a multiple of the common What is the common denominator? denominator. For portion pack Each. items you might choose per 100 Will the price for a single packet of packets as the bid unit, such as mustard register if you require that "per 100." all prices are rounded to two or four decimals? A 7-gram mustard, Below is an example of how this when bid "each," will come out to would appear on the bid or price quote $0.00009. With this kind of forms.

Note: These examples are not intended to be complete descriptions. Only those items necessary to explain bid unit are included.

65 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 6 CHOICE Handy hints for choosing a bid think twice before making this decision. unit: Vendors are often willing to reduce the If all pack sizes are standard, price 1/100th of a cent in order to gain include the pack size in the the competitive advantage. They may description, and the bid unit is a not be willing to drop the price a whole case, bag, or box. cent. The number of decimal places is a major consideration when the bid unit If specific pack sizes are the only is less than a case. Consider this ones acceptable, the description example for corn dogs; the bid unit is should include the pack size "each": followed by the word "only," and the bid unit is case. Vendor A quoted $0.3589 each If upper or lower limits apply to Vendor B quoted $0.36 each the size of the servings or the case, the description should read The invoice price for a 40-count "maximum size XX" or "minimum case: size XX," and the bid unit is the common denominator. Vendor A - $14.36 Choose a bid unit large enough Vendor B - $14.40 that a price carried four decimals will register. Portion pack items This example raises another issue: are a good example of this How will rounding affect the bid price potential problem. when converting to an invoice price? Will Vendor A invoice the district at When specifying something other $14.36 or $14.35? Are you thinking, than a case, bag, or box, leave space for "But that is only a penny a case, why the vendor to answer the question, make it more complicated than "How is your product packed?" which necessary?" is normally shortened to "how packed?" Remember the rule, "Cost is Give vendors instructions on how controlled a penny at the time, not a they should compute units of measure hundred dollars at the time." In a when they fill out the bid or price quote school district that purchases 1,000 forms. cases a year the differences could result Have you ever seen an invoice in considerable cost savings. If the bid where the prices were carried to more had required rounding to two decimal than two decimals? Of course not; you places, the company that bid $0.3589 can't split a penny. However, the prices would not have reduced the bid to on a bid are often carried several $0.35 but would instead have been decimal points. Your school district can forced to bid $0.36. specify that price per unit shall be A savings of $0.04 per case on 1,000 rounded to the nearest whole cent, but cases is equal to $40. When converting to case cost, rounding difference of

66 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DETERMINING BID UNITS FIRST CHOICE $0.01 per case on 1,000 cases is $10. Are you thinking, "Who would take the Make sure bid or price quote time to figure that out?" Remember that instructions specify how bid price will margins in the food industry are small. convert to case price. The fair Bid specialists spend 100 percent of instruction is to multiply the per serving their time developing methods to give price by the case count and round to their companies the competitive the nearest two decimal places. Are you advantage. The skill and saying, "But how else would you make professionalism with which these the conversion?" A vendor could round specialists perform their jobs is to the nearest two decimal number and commendable. As a professional then multiply by the case count. working for the benefit of children you must be diligent to keep the rules of the $0.3589 x 40 = $14.356 or $14.36 game fair. See standard contract $0.3589 or .36 x 40 = $14.40 language, Appendix 16, for recommended wording regarding decimals.

Summary

Food is more difficult to purchase than other items that school districts buy. Inconsistent pack sizes adds a different dimension to developing bids for food supplies. To compare prices, it is necessary to determine a common size denominator. In some cases, there may be two common denominators for the same product. Therefore, the bid unit should be chosen that controls the cost per serving.

67 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 6 CHOICE Notes

68 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 7 Developing Product Specifications cPractice

Does this conversation between school purchasers sound familiar?

"Well, so far I understand how to "Yes, but are we writing specifications, determine the bid unit for a product, identifications, or descriptions? I have read and have developed a plan for all three terms."

allocation of my time."

"The purchasing office says you cannot "Do we use brand names?" restrict brands, that you have to state it as XYZ Brand or approved equal."

"But if you say 'or equal' when the bid "Yes, and I know I often make mistakes actually opens it is almost impossible to because of the pressure to make a determine if all brands quoted are recommendation on bid award before the equal." board meets."

"I don't have to have board approval, but I always put the bid opening as "Regardless of the reason, you cannot make close to first delivery as possible to quality decisions on some food products in decrease the time prices have to stay a short time." firm."

"That's right, and if you make a wrong "Did you ever try to cancel a bid award decision the quality of the food served goes down." because of quality?"

69 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE School purchasers are constantly Unit on which price will be based struggling with evaluating quality at the (bid units) time of bid opening. When there is a 10 Quality indicators: product type to 30 percent difference in the prices of dictates the quality indicators; e.g., competing brands, you know there is a type, style, pack, syrup density, quality difference. Proving that quality specific gravity, age, exact cutting difference requires detailed research, and instructions, weight range, time does not often permit that luxury. composition, condition upon Understanding food manufacturing receipt of product, fat content, cut processes and the impact on food of meat used, market class, variety, quality requires the skill of a food degree of ripeness or maturity, technologist. Few school districts have geographical origin, temperature the services of a person with this during delivery and upon receipt, educational and experience background. sugar ratio, milk fat content, milk Sales representatives can be helpful, but solids and bacteria count, brand they are in business to sell a specific names, trim or yield, preservation brand. If you do not have enough or processing method, trade product knowledge, they can slant the association standards, chemical decision in their favor. standards The unstable nature of the food market doesn't allow for long lead times Packaging procedures and type of between bid opening and first delivery. package As school purchasers are aware, there is Test or inspection procedures a direct relationship between the length of time a price must be held firm and The question is, how are we to know the price paid for product. all those details on more than 300 items? There are many excellent INFORMATION references giving product specification A specification is a statement that details. Some of the best specifications contains a detailed description or are written by the food technologist enumerates particulars of a product. employed by the Agricultural Marketing Various authors list different elements Service (AMS) and the Farm Service for a food specification. The list Agency (FSA) of USDA. The web site following presents the opinions of http://www.ams.usda.gov/ gives the several authors. specifications for those donated foods purchased by AMS. At the AMS web Characteristics in a specification site select food purchases and then Name of product product descriptions to view the Federal grade specifications. Following is an excerpt from the chicken nugget and patty Size information for container and specification: product

70 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DEVELOPING PRODUCT SPECIFICATIONS FIRST CHOICE I. GENERAL originating from sources other than the Frozen cooked breaded chicken United States, its territories or nuggets and patties () possessions, Puerto Rico, or the Trust produced under this Specification will be Territories of the Pacific Islands, the packaged and packed in the following contractor must have an acceptable forms as specified in the contract: identification and segregation plan for Chicken Nuggets (222330) - Frozen those chicken products to ensure they cooked breaded chicken nuggets, are not used in the commodity produced produced from ready-to-cook chicken under this Specification. This plan must and chicken products (parts), or be made available to a representative of boneless parts, meat, and skin. the Grading Branch, Poultry Programs, Chicken nuggets will be packaged 5 AMS, USDA (grader), and the or 10 pounds (2.27 or 4.54 kg) per Contracting Officer or agent thereof plastic-film bag to a net weight of 30 upon request. The contractor must pounds (13.61 kg) in each fiberboard ensure that both the contractor and shipping container. A purchase unit will subcontractor(s) maintain records such consist of 1,300 shipping containers as invoices, or production and inventory totaling 39,000 pounds (17,690 kg). records evidencing product origin, and make such records available for review II. COMMODITY by the USDA grader or other SPECIFICATIONS Government official(s) in accordance A. Basic Requirements with Article 76 of USDA-1. 1. Date Processed. The commodity must not be processed or packaged more 4. Product Temperature. than 30 days prior to the first day of the The temperature of chicken delivery period. and chicken products, size reduced meat and skin, 2. Class. The commodity must be cooked commodity, and the prepared from freshly slaughtered individually frozen chickens (broiler/fryers, 9 C.F.R. Part commodity, unless otherwise 381 or 7 C.F.R. 70.201(c)). specified herein, must comply with 9 C.F.R. 381.66 and FSIS 3. Origin of Chickens. The Directive 7110.3 commodity must be produced and (Time/Temperature Guidelines processed from chickens which were For Cooling Heated produced, raised, and processed in the Products) throughout all United States, its territories or operations including possessions, the Commonwealth of transportation between Puerto Rico, or the Trust Territories of plants. the Pacific Islands. If the contractor processes or handles chicken products

71 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE 5. Chicken Products From Other total weight of the formula. Dark meat Plants. Chilled chicken and chicken may consist of thigh meat, combination products may be transferred or obtained of drumstick and thigh meat in natural from other processing plants, provided proportion as it is removed from the they: (1) have been processed, handled, carcass, or when formulated, drumstick and identified in accordance with this meat may replace a maximum of 45 Specification, and (2) comply with the percent of the thigh meat used in the freshly slaughtered, organoleptic, formula. This is equivalent to a temperature, and other applicable maximum of 18.74 percent of total requirements of this Specification as weight of the formula which could be evidenced by USDA certification. drumstick meat. a. Type, class, and specific name of (1) Thigh meat. The thigh meat must the product; date slaughtered; and the be boneless and skinless with no more USDA-assigned plant number must be than one-half of the thigh meat missing. shown on each shipping container. (2) Drumstick meat. Drumstick meat may be used. The drumstick meat must 6. Meat. The following kinds of be boneless and skinless with no more boneless, skinless meat, in the amounts than one-half of the drumstick meat specified, must be used to prepare the missing. raw chicken portion of the commodity. a. White meat. The minimum 7. Unacceptable Meat. No frozen or amount of ground white meat used in previously frozen chicken or chicken the formula must be 51 percent of the products may be used. Mechanically total weight of the formula. separated (comminuted), flaked, or (1) Breast meat and tenderloins. The finely chopped meat cannot be used. white meat must be from boneless and skinless breasts and tenderloins. No 8. Skin. The skin must be removed more than one-third of a breast half (1/6 from the meat before size reduction. The of a whole breast) or one-half of layers of fat and any fatty tissue or tenderloins may be missing. Rib meat membranes must be removed from the may be used when attached to the neck skin and skin covering the crop breast portions described in this area before it can be used. paragraph. (2) Wing meat. Boneless, skinless 9. Organoleptic and Defect wing meat from the first portion of the Requirements. wing may be used when attached to the a. Organoleptic requirements. The breast portions. skin and boneless, skinless white meat, thigh meat, and drumstick meat will be b. Dark meat. The maximum examined on a continuous basis for amount of ground dark meat used in organoleptic requirements shown in the formula must be 41.65 percent of the Table 1 below. Any meat or skin that

72 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DEVELOPING PRODUCT SPECIFICATIONS FIRST CHOICE does not comply with the organoleptic analysis. Let's pretend that we are in a requirements will be rejected for use school kitchen in a location that does under this Specification. not have access to a laboratory. School b. Defect requirements. Prior to size purchasers must be in a position to reduction, 30 pieces of each meat evaluate all products against the component and skin will be sampled specification used. If you were required and examined separately for the defects to receive product based on this shown in Table 1. specification, where are the gaps in The frequency of sampling and the your knowledge? number of defects allowed will be those In the exercise that follows list those outlined in Poultry Programs' Sample characteristics that could not be verified Plan Level 2 (SPL-2). The examination at the point of receipt. The first two for bone will be made separately from show how to get started. the examination for other defects. (1) Regardless of the kind and Measuring quality number of defects (within Table 1) characteristics at the point found, any sample with bone or hard of receipt (an exercise) bone-like material greater than 0.75 inch (1.91 cm) will be cause for the rejection 1. Chicken raised in the United of the product the sample represents. States (no way to determine in the (2) If the number of bone defects kitchen) exceed the maximum for the "target" level, or results in a rejection, the 2. Organoleptic frequency of sampling for bone defects will be increased to 30 pieces of meat and/or skin drawn twice each sampling 3. interval until the cumulative number of bone defects reverts back to the "target" level. 4.

The most difficult group of products 5. on which to develop specifications is further-processed meat products. Because these products also fall in the 6. product group that accounts for the most dollars per item, it is important to write measurable specifications. 7. A specification must provide for verifying quality characteristics, either on the production line through visual 8. inspection or through laboratory

73 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE Purchasing specialists in the when you require fruits and commercial segment (restaurants, vegetables in the upper limits of convenience stores) and the non- grade A, or only in the lower commercial segment (health care, limits of grade B. correctional facilities, and school food Developing specifications and service) all agree that specifications using them for an extended period should be in writing. with no revisions. Purchasing and receiving staff not The reasons for written specifications: trained to use specifications. Clarifies what the food production unit wants. Some of the additional problems Informs the distributor and which schools can encounter: manufacturer what the customer Getting hit with the "low ball" wants. when vendors try to decrease the Advises the receiving clerk what quality or trade up to a more should be delivered. profitable item after getting the bid. A variety of authors cite many Inequality among bidders when problems related to the use of the specifications are too loose. specifications. Some of the problems are: Decreased competition because of Brand prejudice as evidenced by brand prejudice. naming a single brand without "or Specifications too tight that limit equal" terminology. competition. Delivery requirements, quality Bidding advertises your mistakes, tolerance limits, cost limits and and you get stuck for the contract quantity limits if unreasonable add period. to the price without adding to overall value. Redundant favoritism, when the buyer sends out bids and rejects Inadvertent discrimination; i.e., if all except the usual company, a specifications limit you to one genuine annoyance to bidders that supplier, the time, money and discourages competition. effort devoted to specification development has been wasted. Random bidders, when suppliers bid for your business only when Risk of cost increases when quality their regular business is slow. level specified is difficult for the supplier to obtain. The negatives associated with the Heavy or extreme reliance on use of specifications are clear. If the government grade standards; e.g., school district does not have the staff

74 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DEVELOPING PRODUCT SPECIFICATIONS FIRST CHOICE expertise to develop and effectively use If it is necessary to include specifications, what is the alternative? characteristics that cannot be measured in the school kitchen, the pre-approved Alternative to using brand provides receiving information. It specifications is easy to teach school receivers to The use of descriptions check the brand and code number of a (identifications) with pre-approved product. Receiving is often the "missing brands works well in most school link" in the purchasing process. Some districts. Approved brands can restrict characteristics can be measured through competition if not used correctly. The random testing during the preapproval public purchaser must be constantly process. alert to avoid any appearance of favoritism. Developing descriptions Developing descriptions for one ingredient and one major ingredient Approved brands can food products is not difficult and does not require a lot of time. Use a reliable restrict competition if not reference to find the standard of identity used correctly and review the grade standard. You do not need to include in the description

A description is limited to those characteristics that are essential for Do not include in the communication with the supplier and description those can be measured at the point of receipt. For each characteristic in a description, characteristics covered in answer the question, "How will the school kitchen staff measure this the standard of identity. characteristic?" those characteristics covered in the standard of identity. A blanket A description is limited statement in the bid/price quote to those characteristics instructions should incorporate all federal standards of identity and grade that are essential for standards. Determine the grade standard communication with the which is appropriate for the intended use of the product and include in the supplier and can be description the words "To be packed to measured at the point USDA grade (insert letter grade) standards." of receipt. Developing descriptions for multiple ingredient (highly processed) foods is

75 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE much more difficult. You need a system Step 8 Write a draft description. for this task to get consistent results, Step 9 Use the draft as a guide and such as the example that follows: prepare a product Step 1 Research the regulations that comparison work sheet affect the manufacture of based on the products this food. available in the market Step 2 Seek help in understanding place. Putting in description any complex issues covered requirements that are not by the regulations already available boosts the Step 3 Research any industry cost. Only very large SFA's standards for manufacture of or purchasing cooperatives this product, such as the can afford to have products IMPS (Institutional Meat manufactured to their Purchase Specifications) descriptions. What is large? published by the National Organizations purchasing for Association of Meat over 300,000 students. Purveyors. Step 10 Make modifications in the Step 4 Talk to technical product description if necessary. and bid specialist at major Step 11 Request a review of the manufacturers and develop a description by the technical list of those quality product and bid specialist at indicators they consider major manufacturers. necessary for a fair Step 12 Resolve any differences description. between description and Step 5 Determine those quality manufacturers' review and indicators where the revise the description if regulations do not provide necessary. adequate information. Step 13 Conduct student Step 6 Research those quality acceptability test for indicators where additional approved brands. information is necessary. Step 7 Conduct student taste test to Commercial item descriptions determine which product to The Food Quality Assurance Staff purchase. For example, test (FQAS) of the Agricultural Marketing four hot dogs to determine Service, USDA, develops Commercial which flavor the students Item Descriptions (CIDs). CIDs are prefer: a pork predominant simplified product descriptions that sample, beef predominant concisely describe key salient product sample, a beef and pork characteristics of an available, predominant sample, or a acceptable commercial product and can sample with chicken or turkey. provide valuable information for

76 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DEVELOPING PRODUCT SPECIFICATIONS FIRST CHOICE schools when conducting research Distributors can provide assistance related to the development of food in contacting manufacturers. descriptions. For copies of CIDs or additional information about FQAS, contact can be made at: Food Quality Assurance Staff, Fruit and Vegetable Programs, Agricultural Marketing Service, USDA, Stop 0243 1400 Independence Avenue, SW Washington, D.C. 20250-0243 Sample agenda for a Phone: 202-720-9939 FAX: 202-690-0102 product workshop: Internet: @http:// www.ams.usda.gov

Increasing product knowledge •The raw ingredients including The food technology staff employed the meat blocks by the manufacturers of the products purchased are excellent resources for •Steps in the manufacturing process Planning a one-day •The cooking process workshop on a product is •The breading process an effective training activity. • Seasoning profiles improving product knowledge. Planning a one-day workshop on a product is an effective training activity. To make it cost effective for the manufacturer to make the food technology staff The more highly regulated an available, several school districts could industry the easier it is to develop send representatives to this workshop. descriptions. Getting adequate Each manufacturer is allowed to choose information on new products is difficult. a topic for presentation. After all of the New food products are constantly information has been presented, a panel introduced, and all pass through four of all presenters is an effective tool for stages: obtaining answers to questions. The major topics for the agenda are the Introduction of new products same for all products. 1) Launch - cost is high because of development and marketing cost.

77 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE 2) Market growth - costs are lower, introduction of new products can sales growth is rapid. reduce errors and save time devoted to 3) Maturity - prices decrease as developing descriptions for multiple- competition increases. ingredient foods. Products normally 4) Final - demand for the product move through the phases rapidly drops, and supply remains stable. often less than a year between the New products are developed by launch and maturity phase. Waiting manufacturers to replace this until the maturity phase can save time product, and the cycle starts over. and money and still keep new products coming to students. Review descriptions Schools constantly seek new each time a request for pricing is issued products to avoid the boredom because manufacturing processes associated with serving a captive change constantly. customer. A conservative policy on the

Examples of product descriptions The table that follows gives an example of a product description for each type shown.

78 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE DEVELOPING PRODUCT SPECIFICATIONS FIRST CHOICE References Purchasing staff must have an adequate reference library to develop product descriptions. Following are appropriate references.

Food Standards and Labeling Policy Book, Food Safety and Inspection Service (FSIS), USDA, 1999.Government Printing Office stock #901-008-00000-1, Price: $69.00 as of 2/9/2001. Order from Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, or online at http://www.gpo.gov/ and select U. S. government online bookstore. Use: locating standard names for products, and the meaning of words on labels.

Code of Federal Regulations Title 9, Part 200 to the end, Animal and Animal Products, 2001.Government Printing Office stock #869-044-00024-5, Price: not available as of 2/9/2001. Order from Superintendent of Documents, Mail Stop SSOP, Washington DC 20402-9328, or online at http://www.gpo.gov/ and select U. S. government online bookstore. Use: Information on food safety inspections, labeling and standards of identity for meat.

Institutional Meat Specifications(IMPS), published by the Agricultural Marketing Service at The United States Department of Agriculture, available online at http://www.ams.usda.gov, or call 202-720-4486, or write USDA, AMS, LS, SB, 1400 Independence Avenue, SW, Stop 0254, Washington, D. C. 20250-0254. Use: To provide information when developing meat descriptions.

Thomas Food Industry Register's Buying Guide, published by Thomas Publishing Company, available free to purchasers or specifier of food as of 2/12/2001, call 800-305-tfir, or 212-290- 7341, or Fax 212-290-8749, or order or search online at http://www.tfir.com. Use: To locate manufacturers of a product.

The Almanac of the Canning and Freezing Industry, 1999, Price $73.00 as of 1/12/2001, Order from Edward E. Judges Company, P.O. Box 866, Westminister, MD 21158 or online at http://www.eejudge.com/order.html Use: Standards of identity and grade standards for canned and frozen fruits and vegetables.

Choice Plus: A Reference Guide for Foods and Ingredients, Food and Nutrition Service (FNS), USDA, National Food Service Management Institute order # FCS-297, Price $33.25, 2/9/2001. Order from National Food Service Management Institute, The University of Mississippi, P. O. Drawer 188, University, MS 38677-0188 or print an order form online at http://www.nfsmi.org. Use: Writing descriptions for the 125 foods included in the guide; provides source for standard of identity and grade standard and has several examples of sample descriptions.

Frozen Food Book of Knowledge, 1992, Price:$10.00 plus shipping and handling as of 2/12/2001, order from The National Frozen Food Association, P.O. Box 6069, 4755 Linglestown Road, Suite 300, Harrisburg, PA 17112, or on the internet at http://www.nffa.org. Use: To determine that a description of a food item is consistent with what is currently manufactured.

79 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 7 CHOICE Meat and Poultry Inspection Directory, $42.00 as of 2/12/2001, GPO List ID DMPIP, order from the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA15250-7954, or fax 202- 512- 2250 or order online @http://www.fsis.usda.gov/oa/pubs/gpoorder.htm Use: To determine if a meat manufacturer has a USDA approved laboratory and to trace the establishment number found on a meat label.

An Evaluation of the Role of Microbiological Criteria for Foods and Food Ingredients; National Academy Press; Washington, DC; 1985. HACCP A practical approach, 2nd ed., Sara Mortimore and Carol Walllace; Aspen Publication; 1998. Use: Explain HACCP in detail and guide participant through developing a HACCP training program

U. S. Government bookstores Federal government publications can often be purchased at bookstores operated by the federal government. U. S. government bookstores are located in the following cities: Seattle, Washington; Portland, OR; San Francisco, and Los Angeles, CA; Denver, and Pueblo, CO; Dallas and Houston, TX; Milwaukee, WI; Chicago, Il; Kansas City, MO; Detroit, MI; Columbus, and Cleveland, OH; Birmingham, AL; Atlanta, GA; Jacksonville, FL; Pittsburgh, and Philadelphia, PA; Laurel, Maryland; Washington, DC (2); New York, NY; Boston, MA. For the phone numbers and street address consult the local phone directory or online at http://www.bookstore.gpo.gov/locations/index.html.

Summary

Specifications/descriptions should be in writing. Specification writing requires skills not available in most school districts. Bids make the use of specifications much more complex for schools than for the commercial sector. Prior approval of brands based on screening of products is the most effective approach for school districts. The use of descriptions with pre-approved brands helps to close the link between descriptions and the product received in the school kitchen. Developing descriptions for one ingredient and one major ingredient foods is not very difficult,as these products are highly regulated and the manu- facturing process is stable. Multiple ingredient (highly processed) food descriptions are time consuming. Developing a system for researching issues associated with highly processed foods will yield consistent results. A school purchaser should maintain a refer- ence library adequate to support the development of descriptions for all foods.

80 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 8 Brand Approval cPractice

Each time a bid is opened in a school district in the United States conversations like this take place.

"The bid called for OPQ Brand or approved equal. Why can't they just bid "Yes, if we could just take that or equal off the brand I requested? How am I the bid, this process would not be so supposed to know if TUV brand is complicated."

equal?"

We always have to remember that we "I heard at a workshop that you did not are spending taxpayers' dollars, so we have to use approved equal, but that you have to maintain open and free have to go through a long pre-bid conference to approve brands."

competition."

"At this workshop they talked about the "The key I heard was plural brands, not direct relationship between the number of just one brand." brands approved and the price you pay for

a product."

Bids with only one brand approved food more complex. As food becomes or one brand and "approved equal" are more complex and processors put more becoming more common. Increased use effort into quality control, more school of highly processed products is making districts bid approved brands.

81 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE INFORMATION and use of a product description with no brands the approval decision is made The struggle to compare "apples to between bid opening and bid award. apples" in the descriptions of food With "approved brands only" the products is perhaps the most difficult decisions are made before issuing the task school purchasers face. Unless a bid request. The only difference in the food technologist is available to develop two systems is timing of the brand complex food specifications for a school approval decision. district, there must be another way. When "brands or approved equal" or Using approved brands with product product descriptions with no brands is descriptions is an effective approach to the system in use the period developing comparability. immediately following bid opening is very hectic. Many quality decisions must be made rapidly. In this hurried environment mistakes are inevitable. The struggle to compare Following are the steps for developing "apples to apples" in the each system of brand approval. descriptions of food Brand or approved equal or no brands - after bids products is perhaps the Step 1 Write product descriptions. Step 2 Issue the bid request to most difficult task school potential bidders. purchasers face. Step 3 Open bids. Step 4 Evaluate bids. This is the step at which brand Brand approval timing decisions must be made. School purchasers operate in two Step 5 Award bids. distinctly different environments. In many districts food service has total Approved brands only - control of the purchasing function before bid request except for broad district policies. In When this system is used, follow all other situations a purchasing steps to avoid restricting competition. department exercises a good deal of Step 1 Write product descriptions. control over food service purchases. If Step 2 Classify all products by you operate in an environment with brand approval category. external controls, you will have to Step 3 Conduct pre-bid conference convince that work group that you are with potential bidders. not restricting competition with the Step 4 Screen brands for approval. change to prior approval of brands. Step 5 Notify potential bidders of With "brands or approved equal,"

82 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE brand screening results. Distributor's Choice food and Step 6 Allow potential bidders to supplies - Products that contain one submit additional brands if ingredient, and/or few dollars are spent the original brand submitted on the product. was rejected. Private Label - Products packed Step 7 Screen second group of under industry accepted standards and brands. labeled for one of the private cooperative/corporate groups. These Step 8 Issue a final draft of the products normally contain one major product and brand list. ingredient and other seasoning Step 9 Conduct a final pre-bid ingredients. conference. Manufacturer's Brand - Products Step 10 Issue the bid to potential that contain multiple ingredients, are bidders. highly processed, and subject to Step 11 Open bids. tremendous variations in quality among Step 12 Evaluate bids. brands. Step 13 Award bids. When deciding which category of Obviously "approved brands only" is brand approvals to use for a product, more time consuming. The time the experience of the school district is investment is concentrated in the first the best guide. School purchasers year of the change. Screening brands generally agree that French fried potatoes is an exception to this rule due to the complexity of processing and the The time investment is proportion of food budget normally spent for this product. Brand approvals concentrated in the first are not permanent and can be changed year of the change. in the next bid period if the need arises.

More on Distributor's Choice can require as much as 90 days spread The simplest brand approval over a year. After the first year the category is Distributor's Choice. The maintenance time is about the same or term means the distributor may quote a a little less than required for "or equal." price on any brand. The school district Prior approval of brands provides places no restrictions on the brands to control of the quality decisions. be purchased. The distributor is not asked to identify the brand being bid, Categories of brand approval and the site receiver does not check the Food products can be divided into brand delivered. Therefore, the the following categories for brand distributor may change the brand approval: without notifying the school district.

83 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE Some examples of foods normally "Salt, for table use, iodized, maximum placed in Distributor's Choice category size 25#." are salt, sugar, flour, meal, food coloring, and cornstarch. Name of the product: Salt When developing descriptions for Use: for table use these products, you need only the name Critical characteristic: iodized (both of the product and other critical iodized and non-iodized are stocked) characteristics. Using salt as an Size: maximum 25# ( or could example, the description might read, choose maximum 16-ounce)

How would this item look on the bid document?

Distributor's Choice brand approval offer a price is one factor that allows the distributor to use his could give the firm a competitive knowledge of the market to the advantage. This early in the bid advantage of the school district process bidders would prefer not throughout the bid period. A note of to disclose that information to caution: Don't allow brand switching to their competition. They will increase cost, even if the bid system is discuss brands to be considered not firm and allows for increases. more openly if the conference is private. Competition has not been Pre-bid conference restricted until a bid has been Now let's examine steps required to issued and awarded. The early pre- approve brands before issuing price bid conference is only gathering requests. The purpose of the pre-bid information. All brands approved conference is to determine what brands will be provided to all potential each potential bidder wants considered bidders at the final pre-bid for prior approval. conference. 2. Prepare a list prior to this General rules for the first pre-bid conference of all products to be conference: purchased. Indicate those items 1. Schedule an individual conference that will be approved as with each potential bidder. The Distributor's Choice. Provide all brands on which a distributor may potential bidders with a copy of

84 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE this list a week to 10 days before conference. The distributor the meeting. representative will also be able to 3. The individual representing the pull product from inventory to potential contractor at this meeting allow the school district to review must be knowledgeable about the labels. Holding this meeting on the product line. You want to meet distributor's premises will save with a representative who has the everyone time. most knowledge of the products 7. Samples should never be accepted the company sells. A sales at the pre-bid conference. representative or sales manager should not attend the meeting as the only representative of the Samples should never company. A specialist from the bid be accepted at the department or a buyer is an excellent representative. How well pre-bid conference. you sell the school district as a valuable customer will determine which representative attends the pre-bid conference. The first pre-bid conference 4. Schedule the appointment a 1. Discuss each item (except those minimum of one month in marked Distributor's Choice) and advance. The person with the ask the potential bidder to name most product knowledge is a the brand they would like screened valuable employee who is very for approval. busy. Schedule the appointment by 2. Advise the company phone, but confirm in writing. See representatives of the status of the Appendix 12 for a sample letter. brand they want screened. If you 5. Plan at least one hour for each 15 require follow-up, be specific products that will be approved as about what the company is to do. Private Label or Manufacturer's Potentially you will tell the Brand. company one of the following: 6. The meeting should be held on the a)"A company that had an distributor's business premises. appointment prior to yours has Questions will arise during the also requested screening of that conference. If the meeting is on product. Since they are the distributor's premises the providing a label, nutritional school district will have access to analysis, and preparation product specialists and their instructions on that item, you knowledge. It is too costly for the do not have to follow up. We distributor to send all of the will advise you of the results of product specialists to a pre-bid the screen."

85 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE b)"That is one of the products Labels are the same to the on which we are accepting company as meal counts are to your Private Label; therefore, the school, and manufacturers no additional follow-up is must maintain accountability. required." 3. Prepare a pre-bid conference c)"A copy of that product label, record. The record should detail all nutritional analysis, and decisions made and follow-up preparation instructions will be required. Below is an example of required for screening." Never what a conference record might request an original label. look like. Appendix 13 is a blank of Original labels are inventoried this form for your use at your own and must all be accounted for. pre-bid conference.

Pre-Bid Conference Record

*Label, nutritional analysis, and preparation instructions will be provided by another company, but this company should be advised of results of screening. Circled brands - copy of this label and nutritional analysis should be provided by this company.

86 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE Choose any legends that suit you. reliable history of credibility in the Circling brands is quick, and asterisks canned and frozen fruit and vegetable are convenient. You will have to record industry. a lot of information quickly. Few canned fruits and vegetables are USDA graded, although there is a Explanation voluntary grading system available Private Label means the appropriate through the Process Products Branch of quality of a cooperative/corporate the Agricultural Marketing Service at labeling programs as in Appendix 11. You USDA. know the grade of Private Label fruits This agency performs a valuable and vegetables, but you will need service by establishing standards and confirmation of grade for Oak and Acorn assisting end users (school districts and brands, which are Manufacturer's Brands. other customers) to verify the accuracy White Brand of hot dogs: of plant grades. Company A will provide The processed fruit and vegetable the copy of the label industry and the distributor and nutritional analysis. cooperative/corporate groups have Company A and Company B will be adopted USDA grade standards. To notified of the screen results. protect the investment in their labeling Bass Brand of pulled pork BBQ: the program all groups carefully monitor product code numbers are different; the quality of products marketed under therefore, Company A and Company B their label. both will provide copies of the label and nutritional analysis. After the pre-bid conference confirm Most companies maintain in writing the follow-up required of a first, second, and each company. Appendix 15 contains an example of a product tracking sheet third quality label. useful for follow-up during the brand approval process. Use this same system Most companies maintain a first, when considering new products or second, and third quality label. The brands of existing products. equivalent grades of fruits and vegetables are as follows: More on Private Labels The second type of brand approval is First Quality = the Private Label. The chart found in Extra Fancy and Fancy Vegetables Appendix 11 shows the labeling system (numerical score 90-100) of various cooperative/ corporate Choice Fruits groups. These organizations put a lot of (numerical score 80-90) time and money in developing an image of quality, based on their labeling Few fruits meet the fancy grade systems. Labeling programs have a standards; therefore, groups put Choice

87 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE (Grade B) fruits under the first quality the products packed under their label to label. There are exceptions to this score in an upper range. The issue for general rule apples and applesauce school districts: Do you have the time normally are Fancy Grade under the and money to get this specific? If you First Quality label. develop descriptions that are this specific for the fruit and vegetable Second Quality = category, then USDA inspectors must Extra Standard Vegetables grade the products to ensure that all (numerical score 80-90) products bid meet your quality Standard Fruits characteristics. A cost-benefit analysis (numerical score 70-80) will not justify this much specificity. School districts can trust the credibility Third Quality = of the industry's own quality control Standard Vegetables and don't need to test canned or frozen (numerical score 70-80) fruits and vegetable packed under one Substandard Fruits of the Private Labels. (numerical score below 70) To communicate with vendors, use label quality rather than grade standard Some vendors will argue that their in product description. Don't use US first, second, or third quality products grades as descriptors since the product will grade in the upper range of the is not USDA graded. You could say, "to numerical score (for Fancy the score is meet US Grade A or B standards." 90 to 100, therefore the upper range Examples of descriptions for canned might be 95 or better). Some and frozen fruits and vegetables are cooperative/corporate groups do require presented below.

The descriptions above do not documents. Put the chart found in include the drained weight or fill of Appendix 11 in the instructions section container. These characteristics are of the bid/price quote documents. To covered by federal regulations. See save space you may want to create (cut Appendix 16, standard contract and paste) a chart that contains only language, for recommended wording for the corporate/cooperative groups the bid/price quote documents. represented in your market. Include Private Labels in the bid What if a vendor wants to bid on a

88 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE product that is not packed under one of test the product, using the fee system the Private Labels? To maintain available through the AMS. comparability and integrity of your bid On your bid documents the system, don't approve additional brands descriptions would appear as on this without confirming quality. You should example:

The "how packed?"question was not maintain a working copy and a final asked because this is a standard pack copy of descriptions. The working copy item described as the only acceptable will contain the details necessary to pack. The brand bid question was not complete the product comparisons. asked; can you see why? There will be As an example, review the product less chance of error if you write comparison for chicken nuggets. instructions that tell bidders simply to circle the brand they are bidding. The Name of product: chicken nuggets instruction should state that the Critical characteristics: appropriate label for quality level is Chicken with rib meat to be first understood if they are offering a price ingredient Breaded on a Private Label. Ready to serve To be CN labeled to provide 2 oz More on Manufacturer's meat/meat alternate Brand Size: Minimum 5 nuggets per 2 oz You have identified Distributors serving Choice and Private Label products and put them on the product list. You are now ready to deal with the remaining This is the working copy for products, all of which fall in the screening. category of Manufacturer's Brand To simplify the final bid document, approval. Products are in this category many schools remove the working either because of the high dollar volume description from the bid forms. All you or comparison problems ("apples to need is the name of the product and the apples"). approved brands. The final bid When developing descriptions for document would look something like this category, you will find it helpful to the example on the next page:

89 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE

Label numbers and brand Private Label and code number. approval Choose numbers used for brand For example: approval carefully. Some acceptable Private Label # 9567// Est. 7261 A combinations: The professional purchasing Manufacturer's Brand and code community does not agree on the issue number of acceptable numbers when a Private Private Label code number and Label is involved. One side of the issue manufacturer's establishment argues that using only Manufacturer's number Brand increases the number of items a distributor must stock and could If using the Manufacturer's Brand increase cost. The other side argues that name and product code number, that is you cannot easily control quality if you all you need. Example: ABC Brand # allow the use of Private Labels on 9543. Manufacturers often change the Manufacturer's Brand approvals. product code number, so verify this The decision you make will impact number before issuing new bids. the training program for site receiving Many manufacturers produce clerks. If you choose to approve Private products for one of the Labels in combination with the corporate/cooperative group's Private establishment number, site receivers Labels. Don't use Private Label with must be trained to check both the code number for items that you have product code number and the classified as Manufacturer's Brand. A establishment number on each case. cooperative/ may When developing product change the manufacturer of the comparisons, have a list of products packed under its label, which establishment numbers for reference. may or may not change the quality. To The Directory of the Meat and Poultry protect the interest of the school Inspections contains a numeric and district, include the establishment brand name list of all current number of the manufacturer with the establishment numbers. This reference

90 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE is updated twice annually. established procedure for screening Each CN labeled product has a products and brands. Provide all unique six-digit number for each brand. interested parties (potential bidders, If the product you approve is CN brokers, manufacturers' representatives) labeled, you could use the CN number with a copy of the procedure. Three in documents. The problem is that most steps will help to keep the process distributors' computerized product organized and save a lot of time: inventories do not contain the CN number. If this is the only number for 1. Paper screen - Review label and brand approval, distributor personnel nutritional analysis for compliance may not be able to locate the correct with product description. Review product. the preparation instructions to determine if they provide adequate Ready to Screen information. If the product does The working descriptions are not pass this screen, there is no written, and a decision has been made reason to move to the next screen. about the label numbers for brand 2. Appearance screen - Examine approval. You are ready to begin packaging and appearance of a screening brands for approval. sample, including size and depth The majority of manufacturers of a meat product. If you want the produce two or three quality levels for product for a sandwich and it is each type of product. The first quality too thick, how the product tastes normally carries the company name as is not important. If the product the brand. Determine the does not pass this screen, then manufacturer's brand name of each there is no reason to move to the quality level before you begin screening next screen. products. Often the second quality level 3. Taste screen - Prepare product and will match your description and can serve to customers. This is the substantially reduce cost. final screen and will determine whether the product or brand is Screen products for approval approved. Screening products is the core of the brand approval process. You'll get Appendix 15 is a sample screening samples faster than you can test them procedure which could be modified for unless you have a written, well use in your school district.

Screening products is the The paper screen During the pre-bid conference you core of the brand approval asked potential bidders for labels, process. nutritional analysis, and the preparation instructions of brands to be considered.

91 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE Companies may offer a fact sheet the concept of prior approval of brands, instead of the label. Fact sheets come companies are more willing to supply under the "truth in advertising" laws, copies of labels. but not the labeling laws. Use the label to compare the brand Accept only a copy of the actual to other brands of the same product. label. If vendors say they cannot get a Develop a product comparison sheet label, suggest that they go to the for all products on which prior approval warehouse, pull a case of product, put of brands is required. An example the label on the copy machine, and follows. make a copy. As school districts adopt

Description: Chicken nuggets: breaded, ready to serve, chicken breast with rib meat to be first ingredient, to be CN labeled to provide 2 oz meat/meat alternate, dried whole egg solids to be no higher than third position in the meat block.

92 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE Product comparison juice and juice drink products which Why compare only the first five contain at least 50 percent full-strength ingredients from the ingredient juice by volume are eligible to have CN statement? No reason other than labels. The CN label provides a simplicity; a one-page form is easier to common denominator/equalizer of the work with. For the majority of products amount of meat/meat alternate that is the first five ingredients will allow you creditable toward meal pattern to make the "apples to apples" requirements for food based menu comparison. Attach the labels to this planning systems. However, there is no comparison form for future reference. federal requirement that food products The purpose of label comparison is have a CN label. While SFAs are not to determine if products are equal. The required by Federal regulations to name of the product on the label purchase CN-labeled products, some indicates that brand B and D are not the States require the use of CN labels. If a same as Brand A and C. What is the school district desires a CN-labeled difference? To determine the difference, product, the purchasing specification research the regulations. Are the brands must clearly state that a CN-labeled above equal? product is required. When the Nutrient Standard Menu Planning option is used, a CN label may The purpose of label still be used to compare products. However, the CN statement does not comparison is to determine provide information on the grams of if products are equal. protein in a serving. If grams of protein are used to compare products, the first source of information on a product Brands A and C are equal for would be the Child Nutrition database purposes of obtaining prices. Brand D in nutrient analysis software. If the contains a VPP product and therefore product is not in the CN database, the would not compete equally in price Nutrition Facts panel on the label comparison. When this comparison was and/or manufacturer's specifications completed, Brand B and D would be which include nutrient content can be eliminated and would not be screened used. for appearance or taste. Purchasers need to be aware that using grams of protein has limitations Use of the Child Nutrition and its use is not applicable in the food Label for product comparison based menu planning options. Grams The Child Nutrition (CN) label is a of protein do not provide an indication resource for evaluating bid items. In of the source of protein nor an the Food Based Menu Planning options, indication of the quality of the protein. main dish products contributing to the However, grams of protein is a meat/meat alternate component and measurable indicator that might be of

93 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE

value if using nutrient standard menu information on the grams of fat, planning. sodium, vitamins, minerals, and other nutrients in the food, either from actual More comparison criteria laboratory analysis of ingredients or Don't ask manufacturers for product calculation from a standard data base. A formulas. Product formulas are the nutritional analysis is not required yet, company's exclusive property, and but will become necessary as the new manufacturers will not release this meal pattern regulations are information. implemented . Frequently company sales staff confuse the product analysis sheet with Implementing the Dietary the nutritional analysis. A product Guidelines analysis by the manufacturer's quality Implementing the Dietary Guidelines control department states the product's means that schools must move beyond contribution to the meal pattern. A mere menu making to the purchasing product analysis is often used when a arena. Should your description specify CN label is not required. The formula of the amount of total fat and saturated fat a product with a CN label has been contained in a product? One of the real approved by USDA, and inspectors are dangers is that you will request a present during manufacture. Each product that is not available in the school must decide whether they want market place. Gather information on the the extra control of a CN label. Federal nutrient content of products during the and state auditors accept both the CN paper screen and then make a decision label and the product analysis to verify whether to include such limits in your contribution to meal pattern description. components. Implementing the Dietary Guidelines A nutritional analysis provides is moving forward quickly. In a few

94 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE years we probably will have guidance service to children. Listed below are the that will help in writing descriptions. items that should be included in Until the data keep pace with the goals, manufacturer's instructions. develop your knowledge of the market place. The second half of the product comparison focuses on the nutrient The third part of the content of the product. paper screen is an

Revised working description evaluation of the food Completing a product comparison preparation instructions improves knowledge of a product's quality for those products that characteristics. A working description can be revised before screening is completed, require further preparation and the request for pricing is issued. or heating. Below is a revised working description for this chicken nugget. Storage requirement - dry, refrigerated, or frozen. Some Completing a product instructions will show the actual temperature at which the product comparison improves should be stored. knowledge of a product's Length of time the product can be quality characteristics. stored. Thawing instructions for the product. Description: Chicken nuggets; breaded, ready to serve, chicken breast with rib meat to be first The equipment to use for heating ingredient, to be CN labeled to provide 2 oz. or cooking the product. meat/meat alternate, dried whole egg to be no higher than third position in the meat block, no VPP, The length of time the product minimum 5 nuggets per serving, maximum 15 grams total fat per serving. should be cooked, the recommended internal temperature Appendix 14 is a blank product of the product, and the comparison form you can reproduce for recommended procedure for use in completing your comparisons. checking the internal temperature. The third part of the paper screen Any special instructions to follow is an evaluation of the food preparation during the cooking process. instructions for those products that require further preparation or heating. Maximum length of time the Manufacturers have a staff of food product can be held after cooking. technologists who provide information Any special instructions related to on all factors that impact the quality of holding, such as dry heat and with the product from storage through or without moisture.

95 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE In addition when completing an instructions? If it is necessary to contact evaluation of the manufacturer's the manufacturer to get a copy of instructions a record should be made of instructions, once the copy arrives, where the instructions are located. The where is it filed? Making plans to train following questions should be employees to use the instructions is considered. If they are on the box, do very important. the employees take the product out of Here is an example of a completed the box for storage? If they are in the evaluation of the manufacturers box and the box is discarded before instructions on three products. storage, where do the employees file the Appendix 20 contains a blank form.

Manufacturers' Instructions Evaluation Form

96 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE The appearance screen money, or knowledge to seek only the The purpose of the appearance number one products. The goal should be screen is to determine if packaging is to use high quality products that are appropriate for storage facilities. If only acceptable to our customers. If a product is part of the package will be used, can acceptable to customers, it doesn't matter package be closed for storage? if it rated number one or number two. Examine the thickness and diameter Purpose of the taste screen is to determine of the product to determine if it will if the product is acceptable to customers. provide adequate plate coverage or, if it is a sandwich item, adequate bread Taste test rules (taste screen) coverage. Check for quality The sample should be delivered in characteristics that will not change a full case, sealed container. during the preparation process. If it is a Customers should rate the heat-and-serve item, is the amount of products. (Taste buds are one of browning appropriate? the first senses to decline with age. Review the preparation instructions. Adults should not conduct the Are instructions on the case? Is there a taste screen.) preparation instruction sheet inside the case? If it is not available with the sample, will you be able to get Adults should not conduct preparation instructions? Do the kitchens have appropriate equipment the taste screen. for this item? If recommended equipment is not available, how will Test all products as part of a alternative equipment affect the quality regular meal service. Selecting a of the product? special group of students does not The screening committee should provide reliable results. prepare a narrative of the screen. The Prepare the product in the number of variables in an appearance equipment that will be used. screen are not adaptable to a form. Test only one product or brand per The taste screen day. Americans are highly competitive. No company representatives We grow up with the concept of should be present on the day the winning. Society teaches us to seek the product is tested. number one position. We must be Don't disclose brand of the careful not to transfer this concept to product to students. our review of food products. With food and supply products, rating products as Appendix 15 provides a sample score number one, two etc. causes us to make sheet. Also included in the appendix is some bad economic decisions. School a summary that you should complete meal programs do not have the time, for each product tested.

97 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE Audits of manufacturers Require attendance by all potential Some food service establishments in bidders to this group conference. the private sector are conducting onsite Tape record the conference. audits of manufacturers as an additional measure of food safety. These audits are Have all potential bidders register in addition to the USDA inspection. their presence, giving name, title, While not intended to replace and company name. inspection, these audits raise the level Allow questions about bid of attention to food safety by all instructions. members of the food chain. Appendix At the end of the conference ask, 24 provides a sample of a supplier "Does the bid allow for open and audit. free competition?" "Do all descriptions and brands provide Final pre-bid conference fair comparison of products?" Call When all descriptions are written the roll and ask each and all brands have been screened, you representative to state company are ready for the final pre-bid name and respond with a yes or conference. The purpose is to make no answer. sure all potential bidders agree that brand approval and bid instructions If a "no" answer is received to the allow for open and free competition and final question and the problem that the bid is comparable in all areas. cannot be corrected immediately, don't issue the request for bid. It may be necessary to do additional General rules for the final pre-bid testing, revise the critical path, and conference hold another final pre-bid Schedule the conference a conference. minimum of one month in Thank the company advance. representatives for their assistance Mail each potential bidder a copy during prior approval of brands, of the entire bid package and wish them well as they (instructions and product list) compete for your business. prior to the conference. YES Ask that the company representative be the individual "Does the bid allow for open who will complete the bid. and free competition?" " NO NO Do all descriptions and brands YES provide fair comparison of products?" 98 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE BRAND APPROVAL FIRST CHOICE Summary

Prior approved brands allow a school district to compare products and maintain effective quality control. The fewer the number of brands approved, the higher the offered prices will be. School purchasers should constantly seek additional brands to screen for approval. Brands approved change between bids because of changes in the manufacturer's code numbers. Review brands and code numbers before any bid is issued. The best way to verify code numbers is to request a new copy of the label from the manufacturer. These are the steps to prior approval of brands: 1. Identify Distributor's Choice products. 2. Conduct a pre-bid conference. 3. Identify Private Label products. 4. Screen brands for approval. 5. Notify potential bidders of results of brand screening. 6. Conduct a second screening for those products where a brand was not approved. 7. Mail the final draft of the bid to potential bidders. 8. Conduct a final pre-bid conference. 9. If necessary, resolve problems identified at the final conference. 10. Issue the request for prices.

99 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 8 CHOICE Notes

100 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 9 Getting Ready to Obtain Prices cPractice

The variables that affect purchasing planning are as diverse as school food authorities in the United States. Does any of this conversation sound familiar?

When I listen to you, I realize there are "Those deadlines imposed by the some advantages to purchasing for Child purchasing office are impossible for us to meet!" Nutrition without dealing with another department."

"The purchasing department does assume some of the risk for Child "Do they require you to estimate quantities Nutrition. I just wish they better for your bids?" understood some of the uniqueness of purchasing food."

"No, and I'm not sure we could. There "Does your distributor provide an order are so many variables." guide and a usage report?" "Even with computer support, you never "We really need more computer know when commodities will come. That support to estimate quantities." makes it difficult to predict quantities for a bid period."

"Do you have problems obtaining "Yes, but we document their credit system credits from XZY Distributor?" before we allow them to bid."

101 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 9 CHOICE

"We don't issue request for price quotes

on a regular schedule, and we don't "I've been developing acquisition start on time. I meant to update our plans/critical paths for all my bids and it food descriptions, but there isn't time. helps me to stay on schedule."

We'll just have to use the descriptions from last bid."

"Have you ever wondered why "A bid specialist at a manufacturer told distributors complain if they don't get me that they don't get my bid until the request for prices at least three weeks day before it opens and they don't have in advance? They wait until the last time to research and offer me the best minute to start working on it anyway." price. Wonder why distributors wait until the last minute to send it to manufacturers?" "I don't understand why they wait, but I am thinking about sending copies of selected pages to manufacturers and brokers when I mail the bid to

Developing written purchasing movement of supplies. Acquisition plan procedures assures that the proper is a term used in purchasing for procedure is followed every time and agencies of the Federal government. avoids confusion. School districts that Acquisition or critical path planning can don't document purchase procedures assist a school district to document the have to rely on the memory of an purchasing process. Each time you experienced staff member, and busy request prices you should develop an people may forget. acquisition/critical path chart. The Improving communication between acquisition plan also should detail the schools and their business partners methods that will be used to complete (distributors, manufacturers, and the procurement. brokers) is important if schools hope to Some school districts do not have obtain the products they want at the support from a district purchasing office best price. and therefore must assume all the risk for purchasing decisions. Autonomous INFORMATION child nutrition offices have the freedom "Critical Path" planning is a term to purchase as they choose. If you are used in the manufacturing and in a district that must work with a construction industries to time the separate purchasing office, document the deadlines imposed by this work

102 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE OBTAINING PRICES FIRST CHOICE group. You must document purchasing Providing written procedures to department deadlines before you can industry partners helps to build trust plan an acquisition or critical path. and confidence in the system and will Well documented purchasing result in improved pricing. Below are procedures helps to maintain continuity the steps of the purchasing process in of service when there is a staff change. both situations.

Comparison of responsibilities in two different situations

103 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 9 CHOICE

Acquisition or critical path planning Dry, frozen, and refrigerated allows the school purchaser to keep the groceries, miscellaneous paper and process organized. supplies Purchasing is not part of the daily Service contracts work schedule, so it's easy to forget a task at the appropriate time. Each of the Commodity Processing product categories requires differing Ready to eat foods amounts of preparation and lead time. Beverages The typical school district probably requests prices on the following each Snack foods school year: Develop plans for the next school Milk and milk products year's price requests in early fall of the Ice cream previous year. In the following Bread products examples, the time lapse between steps is what's important. Dates are only for Small equipment illustration. Fresh produce Large equipment Hint: When planning acquisition Office supplies or critical paths, start with date Dishmachine and warewashing of first delivery and work chemicals backwards through each of the preceding steps. 104 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE OBTAINING PRICES FIRST CHOICE Acquisition/critical path plan delivery, the vendor, not knowing what for milk bids price the Federal order will require him to pay, might set a higher base price to Develop product list ...... Week of March 19 protect the profit margin. If the vendor Estimate quantities ...... Week of March 19 knows that he can change the price each Conduct pre-bid conference ...... April 16 time the Federal order changes, his risks are decreased, so the vendor is able to Revise document and product list . .Week of April 24 bid lower. And the base price to the Release of Advance Price Federal Milk Market Order school district will probably be lower. this Federal Order (FO) will be the base for the pricing that establishes bid constant...... May 22 Purchase plan, dry and Issue price requests ...... May 23 frozen food bid Open bids or prices ...... June 13 The purchase plan for dry, Release of Advance Price Federal Milk Market Order refrigerated, and frozen food, paper, this FO may result in an increase in price before first and kitchen supplies is the most delivery ...... June 22 difficult. This product group of 200 to Complete bid evaluation ...... June 27 300 items could be broken into several Approval if necessary ...... July 11 different bids, each requiring a separate

Notify vendor of bid award ...... July 18 plan. Issues to consider when developing this purchase plan are Release of Advance Price Federal Milk Market Order this FO may result in an increase in price before first discussed below. delivery ...... July 22

First delivery ...... August 13 Time lapse, bid award to first delivery Allow two to three weeks between Information used to develop this vendor notification of bid award and critical path: first delivery. The selected vendor needs 1) School starts on August 14. 2) School board approval required, board meets second Tuesday of Allow two to three weeks each month. between vendor notification 3) Board agenda items due two weeks before board meeting. of bid award and first delivery. Note: It may seem strange to have two price increases before the first delivery. The escalation/de-escalation clause is time to service your account. Central designed to adjust for the vendor's risk. administrative units must provide sites The Federal milk order determines what with details of bid award, so sites can the vendor has to pay for milk. If the prepare to receive product. Rushing this school district requires that the vendor step causes the purchase system to fail hold the price firm through the first at the receiving point.

105 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 9 CHOICE Protocol, time, bid they are welcome to review the prices opening to award once the bid award is announced. Vendors are always anxious to know the Time lapse, bid issue to opening results of a bid. They have Allow a minimum of three weeks a lot of time and effort invested. They between the date the bid is issued and want instant feedback, but never provide bid opening. Inadequate time to feedback until the purchaser has enough complete paperwork raises costs. time to check the paperwork for accuracy and compliance with specifications and instructions. At bid Allow a minimum of three opening, take all offers under weeks between the date the advisement. The time required for this step depends on the work load of the bid is issued and bid person responsible for evaluation. Allow opening. sufficient time to deal with any crisis that may arise. The time required to complete this step will be affected by the Bidders need time to get the best prices school district procedure on approval of from their suppliers. Consider planning bid awards. If approval is required by a critical path that puts bid opening the school board, it will be necessary to outside of peak season. The timing, consider the board meeting date when size, and fairness of your bid will developing the purchase plan. determine how qualified the person who completes the bid should be. Protocol at bid opening The manufacturer determines actual Have two or three people present at price you pay for product, but the bid opening. Once the bids are distributors may not provide bid opened and read, the leader should information to manufacturers state the bids will be taken under immediately. Ideally the manufacturer advisement. Under generally accepted should have time to analyze your bid, purchasing practice, an individual who assess the competition, and determine entered a bid is allowed to review the the impact of markets on product price papers of other potential vendors. The during the bid period. Consider mailing documents do not become public information copies of the appropriate records until the bid is awarded and a pages to manufacturers and brokers. purchase is made. Individuals present Mailing copies can increase your bid cost (such as competitors) who did not enter but lower prices paid for product. To a bid are not entitled to review the reduce postage, mail only the pages with papers until documents become public the products the manufacturer/ broker record. They may be interested in bid supplies. Manufacturers do not want to prices to gain information for a later search through a lot of material to find bid. Tactfully advise such people that the one page they are interested in. 106 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE OBTAINING PRICES FIRST CHOICE Time lapse, final update your product list and approved conference to prices brands. Allow three months for this step You only need time to after the first time. revise, copy or print the document and instructions. Estimating quantities How well the school and potential School districts have more vendors completed the earlier steps in problems with estimating the process will determine how many quantities than any other part of revisions are necessary. Two weeks purchasing, but distributors can should be adequate. Should a major make it easier. Most distributors error be discovered during this maintain a customer purchase history conference, revise the final steps in the by business months. Their monthly critical path to allow adequate time to records show all items purchased and correct the problem. quantity delivered. School districts should request this report many months Time lapse, screening to final in advance, giving the vendor time to draft establish the account and accumulate The number of changes to the product the data files. Do not expect to call list and brand approvals will determine today and get the report tomorrow. the time lapse between product screening Until the purchase process is and mailing the final draft. automated, projecting quantities is difficult. You can estimate quantities by Time allowance for screening reviewing invoices for a specified period The first time a school uses prior of time and annualizing numbers. approval of brands, screening products Review for changes based on changes in can take as much as one year. Each menus. The objective when estimating time the bid is issued minor revisions quantities is to predict future use with as much accuracy as possible. A reasonable goal is an allowable error The first time a school uses rate of -10+. The bid documents should prior approval of brands, address the degree of accuracy. screening products can take Consider a clause in your contract guaranteeing that the school district will as much as one year. purchase any quantity left in vendor and update information are necessary. Confirming product code numbers The objective when can cause lengthy delays as you await estimating quantities is to confirmation from vendors. Allow predict future use with as adequate time to verify information. You will lose brand comparison much accuracy as possible. ("apples to apples") if you fail to

107 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 9 CHOICE inventory at the end of the contract up Monitor quantities against purchases to the amount estimated in the bid. during the contract.

PURCHASE/CRITICAL PATH PLANNING EXERCISE Dry, frozen, and refrigerated foods, paper and kitchen supplies This exercise is based on a line item or bottom line bid award. Only one bid will be issued for all products in this category. You will need an annual calendar to complete this exercise.

Summary Written procedures that document the purchasing process of a school maintain continuity and effective planning. Develop a schedule each time a price request is to be issued. The schedule should establish deadlines for completion of each of the major steps. To obtain the best prices, always allow three weeks between the time of requesting prices and opening bids. Consider providing information-only copies of selected pages to manufacturers and brokers.

108 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 10 The Purchase System cPractice

Acceptable purchase systems that comply with purchasing regulations and still protect the interest of children create a lot of confusion in the market place. The confusion creates dialogues like this:

"Line item award of bids is the only method that complies with Federal "Then why are they using market-based procurement guidelines." prices in some school districts?"

"Those are probably rural locations. "We use a small purchase procedure They are not as closely monitored as because we do not have staff with the urban school districts." expertise to develop product descriptions."

"Our purchase system is patterned after restaurants. We have a primary "Predicting our quantities is not possible; supplier contract, and prices are based therefore, we can't go with bottom line as a on cost plus a percentage of the basis for bid award." contractor's cost."

"We award our bids on an all-or-nothing "Do you have to predict quantities to basis, and we do not use quantities. We award a bid on an all-or-nothing basis?" simply add the case cost of all products and

award the bid on the lowest bottom line."

109 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE

"I read where some school districts are going direct to the manufacturer for "We can't do that here. Our distributors will prices." not agree to it.

"There is some discussion about issuing bids for purchase of our food products. "I read in a textbook that regardless of I am opposed to that. Tommy Smith your purchase system you should keep up from XYZ company has called on me for with the current market price for items. 10 years, and I enjoy our weekly visits. I Those market bulletins are too difficult for am afraid he would not get any me to follow." business if they develop food bids."

Many books are written on a proposed procurement. purchasing, almost all for the private Contractor integrity, compliance sector. Purchasing in the public sector is with public policy, record of past the same in some respects, except for performance, and financial and the requirement that schools maintain technical resources must be open and free competition. However, as considered. many authors note, putting bids in the 2. The purchase system must ensure purchase equation adds complexity that open and free competition. is more difficult to manage. Misinformation and lack of 3. Schools must maintain written information are serious obstacles to selection procedures. These improving purchase systems in school selection procedures: (a) provide districts. The inconsistency and lack of clear and accurate technical guidance in this area creates total requirements for the material, confusion for school purchasers and for product, or service and contain companies trying to do business with features that do not unduly restrict school districts. competition; and (b) identify all requirements the contractor must fulfill and other issues used to INFORMATION evaluate bids or proposals. Federal procurement regulations 4. Cost plus a percentage of cost impose firm rules to keep in mind: purchase is not an allowable system. 1. Only responsible contractors who possess the ability to perform 5. To purchase items costing more successfully can get contracts than $100,000 in the aggregate under the terms and conditions of requires a formal purchasing

110 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE method. Public organizations must Approximately every 10 years the follow the most restrictive of local, USDA conducts a nationwide state, or Federal law/rules. Private purchasing study. The 1996/97 school nonprofit organizations can follow year study indicates that adopting Federal rules, even when the certain purchasing practices would not Federal rules are less restrictive necessarily lead to a reduction in food than the organization’s own rules. costs. The executive summary of the Private nonprofit organizations are purchase study is on the World Wide exempt from the state and local Web at http://www.fns.usda.gov/oane/. rules that apply to public organization purchases. Four basic purchase procedures are: 6. Geographic preference, commonly small purchase procedure or called “local preferences,” is not request for quotation (RFQ), allowed. competitive sealed bids (IFB), 7. SFA’s are required to the maximum extent possible to use request for proposals (RFP) domestic commodities. A competitive proposals, and “domestic commodity or product” noncompetitive negotiation. is defined as one that is either produced in the United States or is IFB and RFP are considered formal processed in the United States purchase methods. Noncompetitive substantially using agricultural negotiation can be used only when one commodities that were grown of the following conditions exist: domestically. After conducting a request for prices, competition is deemed All purchases require three basic inadequate. For example, only one decisions: bidder responds to an IFB. the appropriate purchase method, An emergency exists where the pricing mechanism, and competitive procurement method the number of vendors required to would take too long. perform the service or deliver the The Federal grantor agency product. (USDA) authorizes noncompetitive negotiation.

Most of the elements of the three remaining procedures are shown in the comparison on the next page:

111 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Comparison of Purchase Procedures

Small purchase procedure meets the terms and conditions, an IFB The small purchase procedure is requires clear, concise specifications. used for those simple and informal Bids are accepted or rejected on a purchases that do not exceed the pass/fail basis. No negotiation of price allowable dollar amount. Small schools or terms is permitted. An IFB is also use this method but, though normally used to acquire products and allowed, it does not yield the most cost nontechnical services. effective pricing. Small purchase prices Most school districts have standard often are quoted over the phone or by a contract language for sealed bids. This sales person. The purchaser must standard language is often called the record the price quoted and maintain boiler plate. Appendix 16 contains some open and free competition when using examples of language which may be the small purchase method. helpful in developing sealed bid documents. The usual sections of a Invitation for Sealed Bid (IFB) sealed bid document are: Sealed bids are the standard when the only variable is the price of a Section I - Transmittal page and product being purchased. (Food and signature page - Include the supplies are classified as “commodities” Certification Statement related to by other public purchasers in the school debarment or suspension in this district but not by Child Nutrition staff section. (Ask the State Agency for to avoid confusing purchases with a copy of the form.) donated foods commonly called Section II - Standard terms and commodities.). Because the award goes conditions - Some examples: to the lowest responsible bidder who correction of mistakes, collusion,

112 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE unit price prevailing, adherence to specifications. Section III - Special instructions - Examples: extensions, drained weights, brands approved, how to offer alternate brands or substitutions. Often included in this section are RFPs responsibility criteria set at minimums for elements critical to successful bidder performance. These criteria include such factors as experience and delivery capability. The garbage removal. If food is purchased instructions should identify how using anything other than a firm, fixed- the bidder demonstrates price contract, an RFP should be used. compliance with criteria. An RFP allows evaluation of other Section IV - Product list and variables besides cost. To develop a descriptions request for proposal, identify the Section V - Billing address and variables and assign a point value to delivery locations - Exceptions to each variable. Budget/cost is a critical delivery frequency are often noted variable that should get more than 50 on this list. For example, a percent of the total points. notation of schools that require A two-step process is recommended delivery during the summer to evaluate responses to an RFP. The months. first step is negotiating variables in the Section VI - Potential bidders technical proposals. The second or final step is negotiating the price. The RFP Request for Proposal (RFP) instructions should indicate how A request for proposal is the proposals are selected for negotiation. standard method when purchasing the Because the budget/cost portion of the product or service requires evaluating RFP evaluation is objective, it is an several subjective criteria along with the appropriate way to select vendors for price. Some of the services requiring negotiation. The instructions might RFPs are pest control, telecommuni- read, “The two vendors offering the cations, courier, marketing, equipment lowest budget/cost proposals will be maintenance, computer software selected for negotiations.” On the maintenance, staff training, , following page is an example of RFP legal service, auditing, consulting, and criteria for equipment:

113 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Selection criteria for equipment maintenance RFP

Use an RFP selection committee to are then allowed to offer revised evaluate proposals. Each individual on budget/cost proposals, and evaluation the selection committee scores the of the proposals is complete. It is responses to the RFP separately, and the possible that the technical score and the scores are averaged. Another approach budget/cost score of both vendors could is to rank RFP panel scores or discard change. That is why the school district the low and high score to negate the retains documentation showing the effect of a panel member who gives initial scoring and the final scoring. very high or very low scores. When scoring the responses, award The SFA might undertake negotiation the lowest price quote the maximum when, for example, the proposed number of points. Adjust all other response time for emergency calls was responses to a percentage of the unacceptable to the school district. maximum score. Thus, if the lowest Negotiation begins with the two budget for routine maintenance was vendors who offered the most favorable $4,000, then 20 points would be budget/cost proposal, based on the assigned to that response. The next instruction presented above. Step 1 response offered a price of $5,000, so negotiates an acceptable response time the calculation of points would be as with the two vendors. The two vendors follows: $4,000 divided by $5,000 114 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE equals 80 percent. Eighty percent of 20 The amount subtracted would be points equals 16 points. In the example, adjusted based on the estimated total calculate the hourly rate for emergency dollars involved in this anticipated service and the percentage discount off purchase. Placing a value on variables the manufacturer’s list price for is less subjective than the point replacement parts the same way. If the system. Only if the district routinely service is bid as a bottom-line request pays promptly can the district for prices, there would be only one consider including the quick payment budget calculation. discount in the RFP. The discount A different approach to an RFP is to must be consistent with a payment add or subtract from the price quoted schedule that the district can meet. on the basis of variables. Be sure to For example, the district cannot award specify the variables in the request-for- an RFP based on pricing with a net 10 proposal instructions. Here is an days payment if the district never example from the Oregon Child pays in less than 12 days. Nutrition Coalition RFP documents for An RFP is appropriate when 1997/98. The potential vendors were purchasing food and supplies not using asked to respond with a yes or no a firm fixed price. The instructions answer to the following question: provide the following information to potential suppliers, as in this example: Will the vendor provide discounts for Suppliers may petition for cost quick payment of net 10 days? Yes No price escalation every six months. Any increases granted are based Will the vendor provide discounts for on market price increases between quick payment of net 15 days? Yes No the RFP bid and petition for increases. Third Party Market Will the vendor provide discounts for Reports are the only acceptable quick payment of net 20 days? Yes No source of documentation for market increases. Yes answer (net 10 days), $30,000 will be The School District can petition for subtracted from the bottom-line. cost price decreases on the same basis as suppliers petition for Yes answer (net 15 days), $20,000 will be increases. subtracted from the bottom-line. The fixed fee per item remains firm for the duration of the Yes answer (net 20 days), $10,000 will be contract and any extensions. subtracted from the bottom-line. The school district reserves the right to conduct competitive A no answer has no impact on the negotiations with the two suppliers bottom-line. who offer the best bottom-line fee.

115 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE

Following are sample responses to this RFP:

The instructions read, “Negotiations 1. The alternate brand offered on two will be conducted with the two products is not acceptable. suppliers who offer the best bottom line 2. price for the fees.” Based on the 3. announced instruction the school 4. district can negotiate the technical 5. proposal changes needed with Vendor A and B. After negotiations, vendors A and B Identify possible issues related to the would be allowed to offer new fee and technical proposal: cost proposals. When all issues related

116 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE to the technical proposal have been There are two basic methods for resolved, the prices offered determine selecting the number of vendors: which vendor wins the contract. 1) Line item awards – the price offered on each product is Number of vendors considered independently. With all purchases, the school must 2) Bottom-line awards, sometimes decide if products can be bundled called all-or-nothing awards – the together to form a group. Whether the prices offered on products are products are bundled will determine considered as a group. how many vendors get contracts. When purchasing only one product the Line item decision is easy, but many different In the line item example below, products are required to operate a Child products are the same. Prices vary, as Nutrition Program. they would in actual practice.

Vendor award method: Line item

In this example Vendor A will deliver in the range of $50 to $100. Some the peaches, Vendor B will deliver the experts in the industry maintain that for sugar, and Vendor C will deliver the each delivery vehicle operated the pears. distributor must have $1 million in sales The delivery cost is almost the same to stay in business. whether the distributor delivers one School districts frequently receive case or 100 cases. Distributors have notices that distributors are placing a matured in their management systems. minimum invoice amount on all Today a distributor knows the cost of deliveries. This practice shouldn't anger every stop a delivery truck makes. Line school district staff. Customers need item bids offer the distributor no distributors to make a reasonable profit guarantee about the number of cases so they will stay in business. Line item that will be delivered – that is, the award methods offer the distributor no delivery drop size. drop size guarantees. Although distributors don't publish Line item has the least potential for costs associated with delivery, there conflict with business partners seems to be common agreement that (distributors and manufacturers). The each stop a delivery truck makes costs volume is splintered, and therefore the

117 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE business is not that important or Bottom line visible. Bottom-line award makes business This method can be used without more attractive to distributors because projecting quantities. Projected the system guarantees increased drop quantities should be used with all size. Hidden costs associated with purchase systems, but they are not school purchasing also go down with a required element for line item. bottom- line, notably the cost of processing purchase orders, receiving, The purchasing task is most likely and invoice processing. The May 1988 to fail at the point product is Cornell H. R. A. Quarterly, in an article received. entitled “Developing Your Procurement The administrative cost of Strategy,” gave the following typical managing this system is higher delivery costs by delivery size. than with other systems. Developing long term relationships with business partners is not possible. If quality is consistent with that required in other purchase systems, the price paid for product will almost always be higher.

Here is an example of a bottom-line award. Vendor award method: Bottom line

118 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE Bottom line adds a new element to second year. The school district the award: the extended price (unit must prove credibility before price multiplied by quantity. To realizing the decreased cost. compare prices among potential The number of “shorts” and vendors, consider both the unit price “outs” should decrease. It may and the vendor’s extended price. take a year or two to realize this As visibility increases, so does the benefit. As confidence in projected potential for conflict with business quantities improves service level partners. With line item the potential should improve. vendor can pick and choose items on which to offer a price. Bottom line requires a price quote on all items. Schools must project reasonably accurate product quantities for three or four months with bottom line. The school must monitor amount purchased against projected quantity. Donated food delivery schedules aren't 1 2 predictable, which makes accurate short term projection of quantities difficult. Purchasing is still likely to fail when the product is received. The And the award goes to… frequency with which brands and vendors change causes this failure. The administrative cost of managing the system is about the same as line item with quantities. A common and legal method of Developing long-term relationships awarding business is to state in the with business partners is not pricing request that the award will go to possible. two primary vendors. The two vendors with the most low prices get the A bottom-line approach increases business. These two vendors supply the the size of each order and rest of the items based on who offered therefore decreases the the lowest price for each item. Prices distributor's operating cost, which will be higher than with strict bottom should be passed on to the school line because the vendor has only a district. The decreased cost may partial guarantee of quantity. not be evident in the first or

119 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Vendor award method: Two primary vendors

In this example Vendor A and price quote. The school district is Vendor B were selected. inviting unfair price quote practices Some schools want to use bottom unless it supplies accurate quantities. line as the award method but do not Unfortunately vendors often know more want to project quantities. One of the about quantities purchased than the major reasons to use quantities is to school district does. Consider the avoid potential low ball on a vendor's bottom-line example again without any mention of quantities to be purchased. The THE school district buys few pears, and BOTTOM Vendor B knows it, so he decides to lose money on pears to LINE gain the peach and sugar business.

120 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE Bottom line, no quantities specified

Because the district failed to provide two products or as many as “everything quantities, the award went to Vendor B. purchased.” School purchasers are Therefore the final actual cost paid by trained to think of generic product the school district was almost $50 groupings — milk, bread, frozen higher. The vendor knew the quantities vegetables, frozen fruits, canned the school district usually ordered, vegetables, canned fruits, meats, fresh which allowed him to low ball the price produce, dry groceries. This concept for pears and increase the cost for two must be put aside when products are items that the school purchased more grouped for bottom-line awards. The often. distributors available in the specific market influence how products are GROUPING PRODUCTS grouped. FOR BOTTOM-LINE BIDS Milk and bread present few grouping problems since distributors specialize in A term frequently heard in these markets. Paper supplies, fresh conversation is, “We have a prime produce, and small equipment are easy vendor contract.” What does a prime to analyze because the following vendor contract mean? The common distributors usually serve these markets: reference and purchasing textbooks do not define the term. Does it mean 100 Paper supply specialty distributors percent of the items are purchased from Fresh produce specialty a single vendor? Does it mean 100 distributors percent of the meat, grocery, and staple items are purchased from a single Equipment specialty dealers vendor? What pricing mechanism is Broadline distributors who sell used? Are bottom line and prime paper, fresh produce, and small vendor the same concept? equipment A bottom line can be for as few as

121 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Meat, dry groceries, canned and all three groups. If the broadline frozen fruit and vegetable categories distributor offers a successful bid only require a different approach. The on group 3, it is important that it have following distributors serve these cost-effective drop sizes. markets: Meat specialty distributors Pricing mechanisms The pricing system chosen by the Dry groceries specialty distributors school district establishes the degree of Broadline distributors who sell all risk the vendor must take when quoting products a price. The discussion on this issue has escalated to the point where both When grouping these categories for industry and school districts are taking bottom-line awards, think not in terms extreme positions. Isolated incidents of groups but in terms of individual where a vendor quoted a firm price and products. Appendix 3 provides a form was forced to deliver at a loss when the for analyzing the market. market suddenly rose has created these Pay attention to the specialty extremes. These extremes also create distributor as products are placed in situations where the vendor reports groups. The broadline distributor can “shorts or outs” at a level unacceptable offer a price regardless of how products to the school district . If vendors have are grouped. The product line of the too many price increases, they stop specialty distributor will determine the reordering those items. Of course good groups. The groups might look like this: purchasing practice suggests that the school district can force the vendor to Group 1 or bid 1: Chicken products, deliver a contract item. In actual pizza, ground beef, turkey practice the legal cost and work products, and beef patties involved in forcing compliance exceeds the resources of most school districts, Group 2 or bid 2: Canned fruits and and the “shorts and outs” continue. vegetables (except mandarin Establishing long-term relationships oranges), and selected dry among business partners groceries (manufacturers, distributors, and Group 3 or bid 3: All other meats, all schools) is imperative. To achieve other dry groceries, and mandarin effective partnerships will require oranges discussions about how prices of food products and pricing systems can be The meat distributor would offer a modified. Schools need the price on group 1, the dry grocery manufacturers and distributors who sell distributor a price on group 2, and the and deliver product to stay in business, broadline distributor a price on group 1, and companies are in business to make 2, and 3. The market analysis provided a profit. a mechanism to balance the dollars in

122 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE There are three basic pricing types: from unexpected cost increases. Allow 1. firm price for a specified period of the vendor to provide proof from a time, third-party market report of a price 2. reimbursable cost plus a fixed fee increase. If the item is absolutely with a petition for escalation/de- essential for service to children, the escalation based on third- party school could agree to release the vendor market reports, and from the contract and obtain new price quotes for the item. Chapter 11 contains 3. a fixed fee for storage, delivery, a discussion of third-party market cost of money, and profit, with the reports. See standard contract language cost of product established by in Appendix 16 for suggested wording third-party market reports. related to release from contract due to market- driven cost increases. The school must identify the pricing method in the IFB/RFP documents. If the pricing mechanism changes a new 2) Reimbursable cost plus fixed fee IFB/RFP must be issued. with escalation/de-escalation clause Some schools have successfully established long-term contracts that 1) Firm price for a specified period allow price escalation/de- escalation of time petitions, based on third-party market Firm-price contracts should be reports. With long-term contracts limited to one-time delivery or short- schools can establish stronger term contracts because vendors are partnerships with their business reluctant to commit to a fixed price for partners and invest in effective training long periods of time. If firm price is the for site receivers. Market-based bids only system the school or school district offer the advantage of long-term can consider, then the question is how contracts or partnerships with vendors, long the bid period should be. Consider but the length of the contract must be these concepts when making the carefully considered. Factors to decision: consider: The longer the price is held firm, State laws sometimes limit the the higher the cost. length of contracts or the number Short term protects the vendor of times they can be renewed. from unexpected cost increases. Potential vendors need some Short term protects the school protection from increases in their district from unexpected market operating cost; therefore consider decreases. one-year contracts with an option for mutually agreeable renewals If the school district chooses firm for a specified number of years. price, consider putting a clause in the instructions that protects the vendor

123 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Funding for school nutrition Petitions for increases shall be program operations is dependent based on the cost of product and on annual budgets; therefore, bid freight only. instructions should include a fiscal Approval or rejection of requested funding clause. See Appendix 16 increases will be based on third- for recommended language. party market report. Market research from the following Such contracts include two prices: reports is given blanket approval: The potential vendor's cost of The Food Institute Report, Urner product and freight. The contract Barry's Price Current, Urner can be direct with manufacturer or Barry's National Provisioner with a distributor. Yellow Sheet, Urner Barry's HRI- The distributor's cost of doing Buyers Guide, USDA/AMS On-Line business – cost of financing market reports. inventory, delivery cost, marketing Vendors may propose an alternate cost, and profit. This is often market research source. The called the fee-per-bid unit. school district will decide on the alternate source based on the The contract vendor may petition for experience of the firm, the market a product price increase, based on research methodology, and market, but the fee must remain firm references provided by the market for the duration of the contract. The research firm. request for pricing instructions should If a petition for an increase is not read as follows: covered by a third-party market Vendors may petition for increases report, the school district may in the invoice price once every six request that the vendor obtain new months. price quotes from several sources. Vendors may petition for an The vendor is expected to pass on increase based on an emergency market decreases to the school created by unusual market district. The school district may conditions. petition for an invoice decrease Petition decisions are based on the based on third-party market upper number when the market reports. (The author’s experience price is quoted as a range. was that vendors did not pass on decreases to the school district. Petitions for increases shall be However, if the vendor is given received by the school a minimum this mandate the sentence would of 15 days prior to the effective read: “The vendor is required to date. pass on market decreases . . .”)

124 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE Chapter 11 contains a list of fee per dozen. Establish your fee based recommended sources for third-party on how much under the market you are market reports. This chapter also covers able to purchase eggs, your operating how to determine whether petitions for and delivery cost, and required profit escalation/de-escalation should be margins." granted. The price of fresh produce is another item that could come from third-party 3) Fee plus cost market bulletins. With the AMS/USDA The request for pricing is in two online reports, a school district could parts: The distributor quotes a fixed fee establish the cost of product and obtain to cover the cost of storage, delivery, a bid for delivery based on fee over money, profit, freight from manufacturer cost. Look at this example of the steps to their dock, and sales. A third-party in this process. market report determines the cost of the Step 1 Choose the terminal market product. For example, the AMS/USDA that serves your area for the Southeastern Farm Market Summary base. for Wednesday, January 31, 2001, for the Florida market listed the price for Step 2 Begin reviewing the reports Grade A large fresh eggs as $0.67 to daily. $0.68 per dozen. The quote from the Step 3 Decide on a day of the week vendor might be AMS/USDA Florida to establish prices. market plus $0.02 fee per dozen. Step 4 Meet with produce vendors Therefore the school district invoice and discuss the proposed cost for the week of February 5 - 9, change. Share copies of the 2001 would be $0.70 per dozen and last few weeks terminal $21.00 for a 30-dozen case. In this market reports. example the school district had a policy Step 5 Allow the vendors a week or of using the upper range of the market. two to study the change and The request for price instructions materials. contained this information. Step 6 Contact each vendor and The wording for the request might discuss the change. read as follows: "Eggs will be purchased Step 7 Issue the bid for fees. based on the five-day average market Step 8 Award the delivery contract. cost as reported by AMS/USDA, using the (insert region) market. We will Step 9 Decide how to transmit purchase medium eggs in cases of 30 weekly cost to the successful dozen per case. vendor and the site "Each Monday afternoon the school receivers. district will advise you of the invoice Step 10 Settle any quality issues cost for deliveries on Wednesday and related to product. Thursday of that week. Please quote a Step 11 Begin delivery.

125 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE A major change in a purchase Milk system will raise questions. Be Purchase method: prepared to answer some of these: Sealed bids are the usual We purchase the product for less purchase method for milk. than the terminal market quote. Number of vendors: Are we to invoice what you say Most schools must receive Q deliveries of milk every day. regardless of what we pay? Daily deliveries add to the Yes. The process is fair because we cost, but schools aren't built have chosen to use the third-party with adequate chilled storage space for terminal market as our cost. There more than a few days' milk supply. will be no audit of your cost. The Imagine having one vendor deliver the A effectiveness of your purchasing low-fat unflavored milk, another low-fat system could be reflected in your chocolate, and yet a third vendor the fixed fee when you offer a bid. other milk types. Almost all school Sometimes a truck comes by and districts award milk on a bottom-line, offers a very good price on all-or-nothing basis. product. At what price do we sell Pricing mechanism: Milk contracts Q frequently are based on an that product to you? escalation/de/escalation clause tied to a We have a contract that specifies third-party market bulletin. Here is an the price and quality of the example: products we purchase. We must "All prices shall be firm for 30 days, honor the contract. We do not after which prices for milk can increase A want to purchase distressed or or decrease in accord with changes in second quality product no matter Class 1 raw milk prices based on how good a buy it seems. monthly Federal Milk Order When the season is changing on Announcements for the applicable the growing region for a product geographical zone. Prices for milk such as oranges, how will we delivered can be increased or decreased Q at the rate of $0.001 per half pint for know you want to change the variety and region? each full $0.15 increase/decrease in raw milk per hundred weight." We will monitor the market and Bidder should specify the advise you when we are ready to geographical zone on which the price is change. In the example of oranges based. The bidder may use either the we will tell you whether we want processing plant location or the school A Florida, Texas, or California district location. oranges, based on the market cost. At the time the bid is issued, specify the date of the milk market order that is the base for the price offered. If one vendor bases the price quoted on the 126 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE June order and another the July order, onions, and tomatoes is best purchased prices can't be compared. Check with on a firm price contract with an the regional milk market administrator escalation/de-escalation clause. The to find out when the order is updated. escalation/de-escalation clause allows (Get the name of the milk market order both the school district and the vendor administrator on the internet at to petition for weekly changes in the http://www.ams.usda.gov/dairy/orders. cost. The petition is based on a third- htm.) Choose the market order closest party market report. to the bid opening date, allowing the Precut produce has a more stable vendor time to get the price and price than is commonly believed. complete the bid. Consumers want lettuce and cabbage to be perfect round heads. Agricultural products are not always perfect. The Bread precutter contracts to purchase all of the Purchase rejected product from a grower on a method: Sealed bids long-term basis and can therefore offer are often used. Many long-term pricing to their customers. school districts have Firm price with a petition for difficulty maintaining escalation/de- escalation every six competition for this business. When months is the best pricing mechanism food restaurants receive weekly for the purchase of precut produce. The deliveries of bread, all bread is received petition is based on a third-party market frozen – an option to increase report. competition. Number of vendors: To serve a fresh product most schools receive deliveries Frozen, dry, and refrigerated of bread frequently. Frequent delivery products increases cost; therefore, schools select Purchase method: their bread vendors on the basis of Sealed bids for a fee bottom line, all-or-nothing bids. per case or an RFP for Pricing mechanism: Firm price for a service provider one year. contract. High volume product is best bid direct to manufacturer if the cooperative or school district is large enough to Fresh produce purchase in truck load or mixed truck Purchase method: Sealed bids for a loads. A second bid is issued to fee per case or an RFP for a service distributors for purchase, warehouse provider contract. and storage of the product. Number of vendors: Bottom line Number of vendors: Increasing the Pricing mechanism: Whole produce volume per stop (drop size) allows such as apples, oranges, potatoes, distributors to deliver products to

127 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE schools cost effectively. As the number choosing a benchmark partner, review of distributors serving a market its menu before making a contact. A continues to decrease, schools must partner that has a menu with a wide make their business attractive to variety of products can give the most potential bidders. Bottom-line bid award assistance. A limited- menu restaurant is one way to do that. has a much simpler purchasing task Pricing mechanism: Firm price with than most schools. a petition for escalation/de-escalation Some school purchasing innovators based on third-party market reports. have successfully used benchmark The petition period could be every three partners to assist them in improving or six months. No research studies their purchasing practices. These school document whether the increased paper learned: work associated with every three For many items two-part contracts months is justified by reduced cost are useful – one with a manufacturer for the product and freight and a second contract with Direct to a distributor for delivery. manufacturer Bench marking is one of those Combining the volume of many modern terms that describes how a restaurants gives them the edge to company with an excellent performance establish cost-effective contracts reputation manages a given process. In with manufacturers. The use of food service management, restaurant cooperatives provides schools the chains enjoy a good reputation for the same benefits. way they manage purchasing. Most Restaurants purchase low-volume major restaurant chains – whether fast items through the distributor in food, white table cloth, or family dining the same manner as most schools. – have entire corporate departments Cost for product is stabilized when devoted to purchasing products for the the contract is direct with the facilities they own or franchise. The manufacturer. owners of these companies recognize that purchasing is the key to success Small distributors can compete and allocate reasonable resources to more successfully with large this task. distributors under a direct-to- Schools should consider bench manufacturer system. marking the purchasing practices of restaurant chains in their area through Applying open and free competition partnerships or "Adopt a school" rules to manufacturer contracts is not programs between local businesses and easy. The collective advice from school schools. Choose a restaurant chain that districts using this approach is to select has an excellent national reputation and a few items and experiment. Early invite them to teach purchasing. When opposition from the distribution

128 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE community will be intense. However, if fresh product, the school might issue the restaurants can do it, why shouldn't bids for the starting week of school and the schools use this approach to serve again in January. the children better? Everyone is a winner in this Purchase method: Sealed bids scenario. The school or school district Number of vendors: Line item for has substantially decreased its paper the majority of products. Some small work, and the vendor's risk of cost groups on a limited basis. An example: increases is minimized. combination of straight-cut and crinkle- cut French fries. However, other speciality potato products cannot be Warehouse added to this group because of the lack deliveries of similarity among manufacturers. Purchase method: Pricing mechanism: Firm price with Sealed bid petition for escalation/de-escalation Number of vendors: Since the based on third-party market reports. quantity of a single item must be adequate for a distributor to make a cost-effective delivery, the award Low volume products method of choice would be line item. It School districts often might be necessary to bottom-line some place very low volume low volume items. items, such as food coloring and spices, Pricing mechanism: If the school on the bid and obtain prices each time district operates a warehouse, short- a bid or price quote is issued. This term firm prices lower the risk to the practice wastes vendors' time and vendor, who should give the district a needlessly lengthens the product list better price quote. School districts that schools must manage. Schools increase the cost of operating a could easily make a list of all the items warehouse when they require that the that they buy only one or two times per price quote remain firm long term on year. small volume orders. Purchase method: Sealed bid Number of vendors: A bottom-line award with one vendor is the most cost Small Equipment effective. Purchase method: Sealed Pricing mechanism: Firm price with bids an effective period of a week or 10 days. Number of vendors: All school The product would be ordered for districts use bottom-line award when delivery all at the same time or, if they equip a new school. Architects several sites are involved, over several employ one or two subcontractors for days. If volume warrants a second all kitchen equipment. When districts order, the school could get prices for purchase small equipment on a bottom- different periods each year. To assure line bid award, they can receive one

129 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE delivery and complete this task for the that only one school district was a year, the most cost effective way for a satisfied customer. It had taken that school or school district to purchase school district five years to get all the small equipment. Placing orders for necessary data keypunched. The survey small equipment throughout the school covered all major software with a year lowers the volume of any one purchasing module. order, thereby increasing the cost. Some substantial limitations when Pricing mechanism: Requesting using these software programs firm prices for a one- or two-week include: period decreases school paper work and the vendor's risk of cost increases. The software limits the size of the Everyone is a winner. descriptions used on the request- for-price documents. The number of approved brands is Service contracts often limited by the space School districts provided. contract for many services. Examples of The format of the request-for-price service contracts are pest control, documents pays no attention to garbage removal, courier service, good reading format. equipment maintenance, staff training, auditing, software support, computer The software often forces the hardware service, and marketing school district to ask what brand is programs. being bid on every item, even if Purchase method: Request for the school district does not care. proposal The software often forces the Number of vendors: A bottom-line vendor to complete a how-packed contract for all of the components of a section even if the school district service. specified a single pack “only” and Pricing Mechanism: A firm price for variations are not acceptable. a specified period of time. The software will not allow bid award on the appropriate bid unit Technology and e-commerce (i.e., portion cost) thereby causing Purchasing software has been increases in food cost. developed as an additional module with point of sale. The quality of the A good spreadsheet or data base purchasing software reflects the software application often offers more afterthought nature of the development. flexibility and can accomplish the Perpetual inventory most often provides purchasing task more efficiently than the base of data. Bid award is often one most purchasing software currently of the features. An informal survey of marketed to schools. school districts in one state revealed A software package that focuses on

130 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE the order process at the site would classified and managed by brand improve the entire purchasing system. approval type Systems must be developed to reflect classified and managed by actual work done at each level. production record type (category Purchasing begins at the kitchen site. As in menu pattern or on production discussed in Chapter 4, all products are record and whether purchased or not ordered the same way. Software that USDA donated) recognizes the diversity of the products necessary to produce today’s meals Allow the length of the food would help the inventory control description to be flexible on the process. Perpetual inventory in a request for pricing. situation where the site gets weekly Format the request for pricing in delivery produces extra work and left-to-right columns. reduces the time that can be allotted to Allow the vendor to submit the control of inventory. A perpetual request for pricing either online or inventory system for the major by disk. components of the meal that produces the production record but does not Produce an order catalogue for the require the site manager to record the site manager that provides the use of staple food items could be pack of all items – or, even better, justified. The diversity of products must allows for the development of a be recognized. If development was weekly order by week of the cycle approached as a tool for the site instead menu and allows the site to input of the central administrative office, the the quantity of each choice to functionality of the software would produce. The software would then change. This change would solve many complete the math to produce the of the problems of the central weekly order. administrative unit and the site. Allow the site manager to view Software would become management current contracts online at the site focused rather than control focused. and place the site order online. What would effective purchasing Automatically order the stock software look like? It would: items unless the quantity is Allow for management of the changed by the site. product list in several ways: Allow central office approval of the classified and managed by order order and transmit the order type - stock level, menu driven, electronically to vendor. annual, stocked by delivery man Interface the order with the (such as milk or snack items) vendor’s inventory and report classified and managed by shorts and outs back to school purchase method district.

131 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Prepare a receiving report for the discussing what percentage of the site manager that indicates school’s business it has obtained. The quantity ordered and brands to be sales objective is to obtain as close to verified at time of delivery. 100 percent of the business as possible. Think back a few years to a time Allow the site to indicate the order when the services of many vendors is received in total (by count and were required to acquire the products dollars) rather than by item. used in a school kitchen. Today a large Allow the site to record the total percentage of the products are amount of all invoices for receipts purchased from a broadline distributor. and post against the site budget, Step outside the black box and envision always showing the site manager a truck backing up to the loading dock how much budget authority is left and unloading food, office supplies, for the month. instructional materials, basketballs, Capture the purchase history by bats, band instruments, computers, and site and as a district aggregate and phones. For help with the vision of the allow the central office to retrieve future, make a visit to the World Wide by site or aggregate for specified Web at time periods. http://www.patriotfoodservice.com. This broadline distributor is already Track usage history for rebates and preparing for the future. prepare reports for submission to The 2000 revision of The American manufacturers. Bar Association (ABA) model Interface with nutrient analysis procurement code modified and added software, and other software new definitions that allow procurement (menu costing, inventory processes to adapt to the electronic age. management) used by the school The ABA model defines electronic as district. “electrical, digital, magnetic, optical, electromagnetic, or any other similar What does the purchasing future technology.” The authors of the model look like? Child Nutrition spends more code comment “(1) The purpose of this dollars on commodities (the term used definition is to facilitate the use of by the purchasing community for food, electronic documents of all types. The as well as pens and pencils) than in any code does not attempt to anticipate the other area of the school district. Only a specific technologies that may allow the small percentage of the instructional procurement process to be performed and office supply budgets are spent on electronically, but provides the (policy commodities. E-Commerce, purchasing office) with the necessary flexibility to cooperative administrators, and adopt regulations that do so. (2) The distributors are beginning to recognize implementation of electronic this fact. “Penetration of the account” is procurement processes should include a term used by sales staff when sound system checks and balances that

132 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE demonstrate a high level of purchasing through the use of accountability and integrity.” technology and e-commerce. A lot of articles are being written and a lot of attention is paid to e- Evaluating purchasing commerce, but will it benefit school systems food service? A search of the World Evaluate current practice as a basis Wide Web on May 31, 2001 using the for selecting the purchase system that is search words “e-commerce & food” best for the school/district. The listed seven sites that serve restaurants. suggestions below are a guide for Readers are encouraged to visit some of conducting a self evaluation of the these sites. As the systems now exist, it purchase systems presently in place. does not appear that there are many Are the product movement policies benefits for child nutrition. The of the SFA clearly defined? literature does not provide any practical examples of money saved or quality Are the receiving practices improved. E-commerce could be a real adequate to assure delivery of the benefit to school purchasers. An e- product as purchased? A random, commerce company could register on-site review of deliveries is the school districts for an array of products, best way to check this. Have an determine the quantity that will be used individual in central administration in a year, and produce for those involved with awarding bids follow member school districts a the distributor trucks for a week as manufacturer’s contract price. Then the deliveries are made. Are receiving school district would contract with a practices adequate? If the answer distributor for delivery. The e-commerce to the question is no, determine company would serve as the where the system is failing. cooperative headquarters for many Are product descriptions adequate school districts’ direct contracts with to assure comparability? A third- manufacturers. The current problem is party product specialist is the best that contracts are negotiated without person to answer this question, to full and open competition, and pricing evaluate the quality and fairness of does not consider quantity purchased. descriptions as written. If budget Most e-commerce companies are either constraints do not permit the focusing on drop shipments or allowing employment of a third-party, ask the school districts to choose from an the state agency and the National array of distributors. Although no Food Service Management Institute numbers are available, experience indicates that when distributors do not (NFSMI) for a list of school know how much they will deliver, the districts with good descriptions. price will be high. The future is bright Obtain a copy of the descriptions and offers many opportunities for long- these districts use for comparison. range improvement in child nutrition

133 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE Do the purchase systems in the must evaluate where they are and what district reflect innovations in they want to accomplish and then systems developed in the last 10 develop a customized plan. years? When was the last time the Year one — project quantities and purchase systems were changed? begin improving descriptions. Review articles in the School Food service and Nutrition Journal and Year two — refine system to other trade publications. Food project quantities, complete purchasing cooperatives are a good description improvement project, source for information on the and classify products by latest innovations in purchasing. anticipated brand approval type. Is the purchasing environment Year three — begin screening conducive to change? Whether products for brand approval, child nutrition is autonomous from convert milk and milk products a central purchasing department bid to firm price with an provides part of the answer. escalation clause based on third- party market bulletins. Is staff time available for purchasing adequate to manage Year four — complete brand changes? approval, begin studying third- party market bulletins for fresh Is staff expertise strong enough to produce, and complete a market manage change? If the answer is area analysis in preparation for no, are resources available to train conversion to bottom-line firm appropriate staff for purchasing? price (Appendix 3). Is computer technology used to Year five — Convert to approved support purchasing? brands only on a line item bid, convert fresh produce to a third- Changing the purchasing party market based bid system, system and continue to work on market If evaluation of the purchase system area analysis in preparation for shows that a change is needed, take it conversion to bottom-line firm easy. Change will generate a lot of price. conflict with business partners. Make a change from line item to bottom-line Year six — Convert to a bottom- award in phases. Market based bids line firm price bid for meat and probably should be phased in over five groceries, begin studying third- to 10 years. Drastic change could create party market bulletins, and a situation where no one will deliver compare prices paid for products the products. Below is an example of a to the market bulletins. long-range plan for changing the Year seven — Convert two or three purchase system. Each school district high volume items to reimbursable

134 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE THE PURCHASE SYSTEM FIRST CHOICE cost plus a fixed fee with a petition Year 10 — Remove spices from the for increases based on a third- meat and grocery bid and establish party market bulletin. two contracts, one with the Year eight — Convert some manufacturer for the cost of the additional items to third-party product and a second with the market bulletin prices. Experiment distributor for delivery. with contracting directly with a manufacturer for a few high The only certain thing about volume items. purchasing food is that it changes constantly and the purchaser must be Year nine — Convert entire bid for willing to change with market meat and groceries to reimbursable conditions. cost plus a fixed fee with a petition to increase cost based on a third- party market bulletin.

135 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 10 CHOICE

Summary Three basic decisions must be made for all purchases. The decisions are: The appropriate purchase method The pricing mechanism the number of vendors required to perform the service or deliver the product Three basic purchase procedures are small purchase procedure, sealed bids, or request for proposals. Two basic methods for selecting the number of vendors are: Line item awards - the price offered on each product is considered independently. Bottom-line awards, sometimes called all-or-nothing awards - the prices offered on products are considered as a group. Three basic pricing types are: firm price for a specified period of time, reimbursable cost plus a fixed fee for service with petition for escalation/de- escalation based on third-party market reports, and a fee for storage, delivery, and cost of money with the cost of product established by third-party market reports To improve purchasing systems, communication between the manufacturer, distributor, and the school district will need a lot of improvement. Purchasing is the same for the private sector as the public, except public sector customers have to use bids that guar- antee open and free competition and comparability. Creative approaches to purchasing in the public sector must be devel- oped if schools are to apply quality measures to the purchasing process. Change will take the best efforts of manufacturers, distribu- tors, and schools. School children deserve nothing less than the best from these partners.

136 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 11 Monitoring Cost cPractice The speed with which communication occurs today provides new opportunities for monitoring cost. This change in market information availability has generated dialogues like this among school purchasers today.

"The term market reminds me of the local farmers market, where you can "I keep hearing all of this discussion of see the rules of supply and demand at market based prices. What is it?" work."

"The discussions remind me of the . Are we going to begin "There's a lot I'll have to learn if we're purchasing food the way you purchase moving in that direction. My training hasn't stocks?" included anything on market based prices."

Only the most recent editions of INFORMATION textbooks mention market based In the textbook Quantity Food monitoring of food cost. Only a few Purchasing, Kotschevar and Donnelly school districts have experimented with describe two types of markets: this form of price monitoring. It is proving to be very beneficial to school Primary markets purchasers and deserves further study. Secondary markets.

137 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE Primary markets set basic prices and Third-party market information quality standards that promote the Each day an experienced market movement of products. For example, the reporting staff gathers confidential primary grain market for the world is information on what products have Liverpool, England; Chicago is the been traded, what products are offered primary grain market for USA and is and by whom, the price at which strongly influenced by what happens in product is offered, what levels are bid Liverpool. New York is the primary and by whom. Reporters are dedicated market for coffee, and Chicago is the to objectivity. Sales are verified. The primary market for meat in the United final quotations are based only on sales, States. bids, and cash terms. Secondary markets accept or The market quote does not represent produce products and distribute them to every transaction, nor does it represent local markets. Actions in secondary the high and low, but the market does markets can influence what happens in reflect the average. primary markets. Omaha, Kansas City, and Los Angeles are secondary markets for meat and can send signals back to The market reflects the Chicago. Secondary markets are average. becoming more influential and are taking over some of the functions of primary markets. Third-party information Local markets receive product and sources distribute to schools. Distributors are Schools have access to market more involved in physical delivery than information. The USDA, through the in setting prices and establishing market news staff at the Agricultural standards. Marketing Service (AMS), provides a wide range of market information via Three basic reasons why schools the Internet. Schools may subscribe to a should monitor markets: publication of a private market research 1. to determine price of products in company. There are many reliable relation to markets, market research companies. 2. to determine if a request for price Federal market news reports escalation is reasonable or to Access the USDA market reports request a price de-escalation, from the AMS web page at: 3. to establish the cost of the http://www.ams.usda.gov. product.

138 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE Atlanta, GA; Boston, MA; Baltimore, Access the USDA market MD; Chicago, IL; Columbia, SC; Dallas, TX; Detroit, MI; Los Angeles, CA; reports from the AMS web Miami, FL; New York, NY; Philadelphia, page at: PA; Pittsburgh, PA; San Francisco, CA; Seattle, WA; and St Louis, MO. http://www.ams.usda.gov. Here is an example of the information in fruit reports for Friday, February 2, 2001, for the Seattle, Raw beef, pork, butter, cheese, Washington terminal market. milk, poultry, eggs, fresh fruits & vegetables —GRAPES: MARKET LOWER FOB shipping point basis 18 lb lugs bgd CL Perlette A report is prepared weekly for the med-lge 17.00-19.00 few lower American School Food Service Thompson Seedless med-lge Association (ASFSA) and the 18.00-21.00 mostly 19.00- American Commodity Distribution 21.00few 22.50 Flame Seedless Association (ACDA). From the web med-lge 18.00-21.00 mostly 19.00- page choose ASFSA/ACDA weekly 21.00 few 22.50 Black Seedless med- pricing report. As an example, the lge 19.50-22.50 mostly 21.50- 22.50 Red pricing report for Monday, January Globe med-lge22.00-24.00 few lower 29, 2001, listed the market price for 5- pound American cheese as Another example from the vegetable $01.2325 — $01.50 per pound. The reports for Friday, February 2, 2001, for previous week's price was reported as the Pittsburg, Pennsylvania, terminal $1.2175 — $1.3025 per pound. market.

Fresh fruits and vegetables --TOMATOES: MARKET MX LOWER, From the AMS web page, select FL ABOUT STEADY. 25 lb ctns lse market reports and fruit & vegetable FL85% U.S. One or Better Mature reports, which includes several options. Greens light red-red 5x6s 11.00-12.00 The most useful for school purchasers 6x6s14.00-15.00 mostly 14.00 flts 2 lyr are the U.S. Terminal Market Price and MX Vine Ripes 4x5s 10.25-11.50 Supply Reports. A review of the other 5x5s9.00-10.50 lugs 3 lyr MX Vine Ripes 30-plus reports is an excellent 6x6s 15.50-17.00 mostly 15.50 15 lb educational opportunity. A list of fltsMX Vine Ripes Greenhouse terminal markets will appear on the Hydroponic 25s 15.00-16.50 few higher. screen. School purchasers should 5 kg ctns on the vine NL Vine choose the terminal market Ripes red 19.00-19.50 mostly closest to their geographical 19.50 location. The terminal markets currently are:

139 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE —TOMATOES, CHERRY: MARKET Milk FL STEADY, MX HIGHER. flts 12 1-pt Milk is the most commonly used cntrs with lids FL Grape Type 12.75 flts market report. The source for this 12 1-pt bkts MX 12.50-13.50 information is free from USDA. Access —TOMATOES, PLUM TYPE: Federal milk market orders online at MARKET STEADY. 25 lb ctns MX Roma http://[email protected]. Select the lge 9.00-10.00 8.00- 10.00 web site for the milk market administrator for your region of the An easy to understand document on country. If you are not sure which understanding and reading the market region your state is in, check the reports is available on the AMS Fruit Federal milk market order maps. and Vegetable web page. This document Select current Class I prices. provides definitions of terms and abbreviations used in the reports. Milk is the most commonly used market report.

* Subject to applicable location adjustments ** The processor assessment is an obligation under the Fluid Milk Promotion Order (7CFR 1160.101 et seq.) 1/ per hundredweight. 2/ per pound. 3/ prices at 3.5% butterfat are calculated in the following manner: 0.965 multiplied by skim price, plus 3.5 multiplied by butterfat price. 4/ announced for the month on or before the 5th of the following month. 5/ base price for Class I is the higher of the Class III or IV prices at 3.5% butterfat.

140 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE Poultry: Eggs of all types (shell, Below is an example of the breaking stock etc,) broiler/fryers, broiler/fryer report from the USDA/AMS turkeys, and special poultry items such market news web page at as: capon, geese, rabbit. http://www.ams.usda.gov/.

JACKSON, MS. FEBRUARY 05, 2001 SOUTHERN STATES BROILER/FRYER PARTS. Federal-STATE F.O.B. DOCK OR EQUIVALENT, ICED-PACKED, PRICES SHOWN ARE DAY OF SHIPMENT (INCLUDES CURRENT AND PRIOR NEGOTIATIONS), TRUCKLOT AND LESS THAN TRUCKLOT VOLUME, CENTS PER POUND. AS OF FEBRUARY 5, 2001

American Institute of Food subscribe go to Distribution Inc. (AIFD) has been http://www.foodinstitute.com. providing research and information The AIFD also provides monthly services since 1928. Its weekly Food reports via fax on the following indexes: Institute Report gives price and Consumer Price (CPI), Grocery Store inventory information on canned Price (GSPI), Producer Price (PPI), and vegetables, canned fruits, dried Eating and Drinking Place (EDP). AIFD vegetables, dried fruits, frozen also offers price trend publications such vegetables, frozen fruits and juice as the Foodservice Price Trend concentrates; futures prices on food Handbook. Contact the American products and commodity prices from Institute of Food Distribution at 28-12 the Wall Street Journal, and mergers Broadway or P. O. Box 972, Fair Lawn, and acquisitions in the food industry. New Jersey 07410-0972, or by phone The Food Institute Report is available (201) 791-5570, or Fax (201) 791-5222. online for a subscription fee. To

141 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE Urner Barry Publications, Inc., is Mail delivery - $450 annually the oldest commodity market news Yellow sheet fax service - reporting service in America. Founded 1 report = $215 quarterly in 1858, it has maintained a leadership 2 reports = $405 quarterly position in the field. Its purpose is 3 reports = $610 timely reporting of unbiased price Yellow sheet e-mail quotations and market conditions for 1 report = $57 monthly the poultry, egg, dairy, meat, and 2 reports = $108 monthly seafood industries. The company offers 3 reports = $164 monthly a complete line of phone, fax and EMail services. They publish 11 market The reports can be selected from: newsletters and several books. Many Noon Beef; Noon Pork, Closing Beef, market reports are also available online, Closing Pork, Closing By-Products, Beef the full range of services can be viewed Comments (twice daily), or Pork @ urnerbarry.com. Information on Comments (twice daily). some of the publications is presented below. For current subscription rates Urner Barry's Seafood Price-Current contact [email protected] or call is available on Tuesday and Thursday. 800-932-0617. The subscription rates as of February 2001 are: Urner Barry's Price Current is Mail delivery = $325 annually available by mail, phone, or fax. The Fax = $207 quarterly subscription rates as of February 2001 E-mail = $44 monthly are: Daily by mail = $415 annually Published each Thursday, the HRI Fax = $396 quarterly Buyers Guide is a weekly newspaper Poultry e-mail = $120 monthly that gives current commodities prices Egg e-mail = $120 monthly paid to wholesalers and distributors by hotels, restaurants, clubs, institutions, In 1992 Urner Barry Publications and any other "away-from-home" eating acquired the National Provisioner's place. This publication reports prices "yellow sheet." Most beef, pork, lamb, that include the freight and distributor's and veal market information is now cost of doing business. A subscription reported from the acquired Midwest to this publication will provide the office. For example, this publication current market conditions and prices for reports daily on the price of 50% lean fresh dairy, egg, poultry, meat, seafood, trimmings, either fresh in job lots, or fruits, vegetables, and other perishable frozen in car lots. All prices are FOB foods. Available from Urner Barry Midwest river area. The subscription publications by e-mail for $223 annually rates for the yellow sheet as of February or fax for $223 annually. 2001 are:

142 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE HOW TO USE REPORTS Comparison A: School pays $15 minus $14.40 = $0.60 difference. 1) Monitoring markets for fair price Analysis: This price is only 4% higher than estimated cost Purchasing specialists all agree that probably fair, allowing for freight, end users (schools, restaurants) should cost of inventory and delivery, and monitor markets to determine the a reasonable profit. Fair price also relationship between the market price depends on volume. If all canned and the price the user pays. The next vegetables are 4% over the section shows how a school can estimated cost, then the purchase calculate a fair price for canned green system should be evaluated. beans from market reports. The Food Institute Report published by the American Institute of Food Comparison B: School price is $13 Distribution reports that Midwest, fancy, minus $14.40 = ($1.40) under 4 sieve, cut, green beans in 6/#10 cans market. are $10.50, with some trading for less. Analysis: This price is 11% under Add to market price the freight from market and should be reason for the Midwest to the purchaser's location. concern. An immediate review of The best approach is to call a local product being delivered is freight company for an estimate. The indicated. Is the product Grade A 4 amount actually paid for freight will sieve? If not, follow procedures for vary by distributor. dealing with product that does not For this example, freight estimate is meet descriptions. $1.50 per 6/#10 case from the Midwest to the Memphis, Tennessee area. 2) Determining if a petition for Sheltered Income makes it very difficult escalation/de-escalation is to determine what portion of a firm reasonable price is the distributor's fee. Distributors never tell their real markup; they talk in Determining the price of a product terms of percentage over cost. Unless from a market report is a schools can determine cost, percentage straightforward process. Remember to over cost has no meaning. follow the rule related to upper or lower The experience of school districts limits of the range stated in the request which establish cost of a product and for price instructions. The reported bid a fee suggests that it might be between 20 and 25%, so for this Remember to follow the rule example we will use $2.40. Cost of Product $10.50 related to upper or lower limits Freight 1.50 of the range stated in the Distributor cost 2.40 Total cost of product $14.40 request for price instructions.

143 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE market price at the time the bid is are some examples of petitions for opened is compared to the reported escalation/de- escalation and the market price at the time the petition for decision making process. escalation is received. Following are the Example A steps in the process: ABC food company petitions to Step 1 Determine the market price increase the price of corn-on-the-cob of the product as close as (96/3" ears per case). The request was possible to the time of the to increase the price to $13.57. original price quote/bid. Step 1 The market report on bid Step 2 Determine the current date showed market price at market price of the product. $10.38. Step 2 The price on petition date Step 3 Calculate the difference. was $11.45. (The bulletins Step 4 Determine contract price of also indicated that inventory product only. stocks were down, and it is Step 5 Determine difference in extremely difficult to find contract price and requested product.) change. Step 3 Difference in the market price between the date of Step 6 Compare requested change original bid price and the to market change. request for petition: $11.45 - Step 7 Make the decision. $10.38 = $1.07. Step 8 Calculate new contract price. Step 4 Invoice cost = $12.52 minus fee of $2.08 = $10.44 cost The petition for an increase should of product at bid time. be based on the increase/decrease in $13.57 minus fee of $2.08 = the market only. A price quote below $11.49 cost of product at market is the responsibility of the time of petition. vendor; they are not allowed to go up Step 5 Difference in bid price to market by petitioning. If this were compared to requested not the rule a vendor could win the escalation: $11.49 - $10.44 = business and recoup any losses during $1.05. future extensions of the contract. Here Step 6 The requested increase of $1.05 is less than the The petition for an increase reported market change of $1.07. should be based on the Step 7 Petition is approved. increase/decrease in the Step 8 New invoice cost becomes market only. $11.49 + $2.08 = $13.57.

144 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE Example B Step 1 The market at the time of Now look at an example where the quote was $22.12. school district requested a price Step 2 The current market is decrease based on third-party market $23.25. reports. All steps were considered, even Step 3 The difference is $2.13. though some of them did not apply. Step 4 $25.32 minus a fee of $4.20 Applying all of the steps each time is = a product cost of $21.12. one way to learn the process. Step 5 $28.32 - $4.20 - $24.12, $24.12 minus $21.12 = Step 1 Reported market price at $3.00. time of bid was $1.69 to $1.74. Step 6 The market change was + $2.13, the requested change Step 2 Current reported price = + $3.00. $1.80 to $1.85 per lb. Step 7 Grant an increase in the Step 3 Using the upper limits of amount of $2.13. market price $1.74 minus $1.85 = ($0.11). Step 8 Petition for $28.32 denied, granted an increase to Step 4 Top inside round beef roast $27.45. invoice cost $2.35 per lb minus fee of $0.39 = $1.96 The vendor was protected from the product cost. market change, but the integrity of the Step 5 Not applicable bid process was maintained. The Step 6 Not applicable vendor was not allowed to increase the Step 7 Request a decrease of $0.11 price more than the market. per pound. Provide a market report and notify vendor of Example D effective date. The request for price contained a Step 8 New price: $2.35 + ($0.11) request for 2-pack saltine crackers. The = $2.24. brand approval type was distributor's choice. The crackers were packed 200/2 Example C count per box. The price quoted was Using third-party market reports $11.28 per box. A petition was received reduces the vendor's risk so the school for an increase to $12.25 per box. district receives lower prices. An escalation petition can be partially Step 1 No market bulletin for approved even if the market information crackers - not applicable. does not support the full increase. The Step 2 Not applicable. distributor petitioned for an increase Step 3 Not applicable. from $25.32 to $28.32. Step 4 $11.28 minus fee of $2.28 = product cost of $9.00.

145 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE Step 5 $12.25 - $2.28 = $9.45, JULY AUGUST SEPT. OCT. $9.45 - $9.00 = $0.45. Step 6 Not Applicable. Class 1 base $11.96 $11.94 $11.50 $11.45 Step 7 Requested increase denied price (3.5%) and distributor requested to CWT CWT CWT CWT obtain new pricing from at Base skim least two sources. $7.82 $7.89 $8.01 $8.15 milk price Step 8 Not applicable. CWT CWT CWT CWT Base $1.2375 $1.2352 $1.2425 $1.2452 butterfat The distributor reported back that per price for Brand B quoted $8.95, Brand C quoted pound Class I $9.50, and the manufacturer that had the present bid offered to drop the price to $8.90 per box. What should the school district do? Calculation of new prices for skim This was a distributor's choice item. It milk does not matter to the school district The escalation/de-escalation clause what brand is delivered, so the lowest in the request for prices read as follows: price quote was accepted. "All prices shall be firm for 30 days, Now consider the price for a after which prices for milk can different product. ABC School increase or decrease in accord District opened bids for milk on with changes in Class 1 raw July 25, and the bid offered milk prices based on was to be based on the July monthly Federal Milk Minimum Class and Order Announcements Component Prices. The bid for the applicable was awarded to XYZ Dairy geographical zone. for $0.1325 per half pint of Prices for milk whole, un-flavored milk. delivered can be Each month the school increased or decreased district purchaser accesses at the rate of $0.001 the Current Announcement per half pint for each of Minimum Class and full $0.15 Component Prices for their increase/decrease in Federal Order Number and raw milk per hundred determines the impact of the weight." cost on prices. Here is a portion of the advance prices and pricing factors from the appropriate milk orders:

146 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE

Make the comparison of current (Class I skim milk price/cwt x .98) price back to the original market order, +( butterfat price x 0.02 x 100) = 2% which was the base month for the bid. milk price per hundred weight Add the increase/decrease to the original bid award. July ($7.82 x .98 = $7.66) + The Announcement of Advanced ($1.2375 x .02 x 100 = Prices and Pricing Factors for the Federal $2.48) = $10.14 Milk Market Order which covers your school contains the price per hundred August ($7.89 x .98 = $7.73) + weight (CWT) for skim and whole ($1.2352 x .02 x 100 = (3.5%) milk. $2.47) = $10.20 If you purchase 2% milk, it is necessary to make an additional calculation. Here is an example using September ($8.01 x .98 = $7.85) + the prices from the sample ($1.2425 x .02 x 100 = announcement. $2.49) = $10.34 A hundred pounds of 2% milk (2% butterfat content) contains 98 pounds of October ($8.15 x .98 = $7.99) + skim milk and two pounds of butterfat. ($1.2452 x .02 x 100 = The price of milk is per hundred $2.49) = $10.48 pounds and the price of butterfat is per pound. The formula for determining the price of 2% milk per hundred weight is:

147 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE Calculation of new prices for 2% milk

why a formula is necessary for market Miscellaneous information which based price escalations. Below is a may be helpful: There are section from Urner Barry's yellow sheet approximately 186 half-pints of milk in a hundredweight of milk. Considering the product loss during the normal handling and bottling process, a hundredweight should yield approximately 180 half-pints of milk.

Purchasing mixed product The purchase of a mixed product adds a new dimension to market based prices. Formulas for products are proprietary information, and companies cannot share those formulas if they are to maintain a competitive edge. All states and the Federal government have laws which allow companies to protect proprietary information. Under these laws school districts can agree to protect the information and should have in place a procedure that guides staff through the process. On the next page is an example of

148 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE MONITORING COST FIRST CHOICE

for April, 1986. figures when dealing with a product The original bid on this product was whose price changes almost by the hour $1.60/lb. is prohibitive. Some of the questions that may arise: Step 1 Contract price of ingredients: Is the company entitled to recover $1.60 x .488 = $0.78 for its losses prior to the petition? ingredients (plus .512 x When the market shows the first $1.60 = .82 for production indication of declining should the = $1.60) school district request an Step 2 Current market price immediate decrease or wait until a compared to invoice price: market trend develops? $.78 (old price) + (.78 x .4534 = .35 increase) = When the school district and vendor $1.13 new ingredient cost develop a partnership based on trust and openness, these issues can be Step 3 New price = ingredients solved. All negotiations must be plus production costs $1.13 approached with a sense of fair play for +(.512 x 1.60 =.82) =$1.95 $1.13 + $0.82 = $1.95/lb. All negotiations must be approached with a sense of fair Market based petitions for play for the children, tax increases/decreases is not an exact science. The cost of maintaining precise payers, and the vendor.

149 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 11 CHOICE the children, tax payers, and the vendor. As school purchasers we are just beginning to learn how to deal with third-party market prices. The potential of this approach has many possibilities for improving our sources of supply for products necessary to produce high quality school meals.

Summary

Monitoring the cost of product through third-party market bul- letins is a new concept for most school purchasers. This prac- tice is routinely used by the private sector. There are three potential reasons for monitoring cost: To determine fairness of price being paid for products; To determine if request for price escalations is reasonable; To establish the cost of the product.

Third-party market reports are widely used for milk purchase, and this concept has the potential to be expanded to other products.

150 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 12 Laboratory Testing of Products cPractice

Emphasis on implementation of the Dietary Guidelines has presented school purchasers with a new area of knowledge in which to operate. Conversations like this indicate how uncomfortable we are with laboratory testing and nutritional analysis.

"I wonder if this nutritional analysis is " I always thought this product had more correct." fat than this analysis shows."

"It was nice of this company to put a "It's on the label, not just a fact sheet. This nutrition facts label on this product even though it is not required, but it company has an excellent reputation. doesn't compute according to the 4-9-4 Surely they wouldn't risk a felony

rule. They must have made a mistake." conviction for mislabeling product."

"Concern about the validity of some of the "I just really don't know enough about information I've been supplied on the laboratory analysis and nutrient data bases to have an intelligent products we are serving our children has conversation." made me consider some random testing of samples."

"I'm really concerned about food safety issues and the number of recalls of food "Our suppliers are quite reputable - there is products reported in the news. Are we no reason for concern."

serving safe food to our children?"

151 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 12 CHOICE The public and the Federal funding When considering testing of meat agency are demanding accountability and poultry you want to know if the lab for the nutrient content of school meals. is accredited by the U. S. Department of The media is testing product, looking Agriculture (USDA). What is the for negative stories. School district advantage of a USDA-accredited lab? purchasers are operating in this Should a question arise about a complex arena without adequate skills. product, you are assured that lab results School purchasers need knowledge from a manufacturer or an independent in the complex area of laboratory lab will match those of USDA. testing. Few school offices have a A USDA-accredited lab is approved reference on laboratory testing. Rarely to perform some, but not all tests, so are training programs on tests and the you need to know for which tests the validity of data bases available to staff lab has accreditation. They can be who must deal with these issues. accredited to perform "protein, moisture, fat and salt as a group INFORMATION (PMFS)." A test can be conducted for Basic information about laboratory pesticide or the presence of a specific testing procedures puts the purchaser in bacteria, such as Listeria, but there are a stronger position to ask the right no accreditation standards for total questions. The first question to ask bacteria count. when hiring staff is, "What are their Not all labs conducting PMFS test qualifications, and can I verify what are accredited. Sometimes good labs they tell me?" Apply the same standard choose not to be accredited. The initial to the laboratory: fee to apply for accreditation is $3,500. "What are the qualifications?" A lab applying for accreditation is checked on accuracy six times each AOAC and USDA labs year. The lab gets a set of 36 samples, The Association of Analytical runs the tests, and reports results back Chemists (AOAC) is a professional to USDA. Every two months an group that publishes a list of approved accredited lab receives another set of procedures for conducting all laboratory samples. Any lab that does not analysis. The first question you want to demonstrate acceptable proficiency has ask is, "Does the laboratory implement accreditation withdrawn. Once AOAC procedures?" accreditation is withdrawn the lab must wait six months before reapplying. Since the accreditation status of a "Does the laboratory laboratory can change, school districts should have a reference showing labs implement AOAC that are currently accredited. A USDA publication called The Meat and Poultry procedures?" Inspection Directory provides a list. For

152 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE LABORATORY TESTING OF PRODUCTS FIRST CHOICE ordering information see Chapter 7. Salt - $10 to $15 How is a school district to decide Minerals - $25 to $30 for each whether to employ a USDA-accredited mineral lab or a non-accredited lab? The Cholesterol - $125 decision should be based on what you Saturated fat - $125 will do with results. If, for example, the potential for legal action based on the In addition there may be a lab results is high, then your chances in preparation charge of approximately court are improved with results from an $15 for a group of minerals, and $20 to accredited lab. If the laboratory analysis $40 for fatty acids. The Nutrition is to verify information provided by a Labeling Education Act (NLEA) requires manufacturer, then a good lab without analyses for vitamins A and C. The test accreditation is acceptable. for other vitamins can be very complex and take as long as 30 days. Number of samples to test NLEA also requires labeling for iron, How many samples of a product calcium, and sodium. Mineral content must be tested to obtain valid results? of a food item is determined by atomic Most food chemists say that 12 samples absorption spectroscopy. The cost of a should be tested before reaching any test for a mineral is approximately $25 conclusions. The manufacture of food is to $30. The cost of equipment to run a not an exact science. One reason is that mineral test is between $14,000 and raw products are not identical. Request $20,000.

Requesting nutrient Most food chemists say that information 12 samples should be tested These prices will explain why laboratory testing is expensive. A school before reaching any district in a situation where testing is conclusions. necessary has no choice but to make the expenditure. Without realizing what they are doing, school customers sample collection guides from the increase the cost of the food products laboratory conducting the analysis. with unreasonable requests for nutrient information. Cost of laboratory tests A manufacturer who sells to both One of the concerns of a school the retail and wholesale (food service) district considering random testing of markets has available the basic product is cost. The cost estimates information NLEA requires. See below are per individual sample: Appendix 18 for a sample Nutrition Protein - $15 to $20 Facts label. Most retail products are Moisture - $5 to $10 required to have this label. Fat - $20 to $30 However, if the manufacturer sells

153 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 12 CHOICE only to the wholesale market, this this determination, labs test the amino information may not be readily acid content of the product and then available. Requesting the nutrient link the specific amino acid profile back content of a product just from curiosity to the protein source. This is a very could boost expense, and all school costly process. purchasers eventually pay some of the cost. Request for nutrient information Testing fruits and vegetables should be limited to those nutrients for Grading fruits and vegetables under which you have a specific scientific laboratory conditions could be recommendation related to children's necessary for school purchases. The health. If, for example, you decide you chapter on the regulatory environment want to know the caffeine content of a discusses the various types of grading food, don't ask the manufacturer's sales inspections available. A lot inspection is staff to provide that information. probably the type that you would Sales staff are trained to please the require. For information on obtaining customer and they will get the this service contact the closest requested data, adding to overall processed fruit and vegetable inspection manufacturing cost and the price office of the USDA/AMS. This everyone pays. If you're the only information is available online at customer who wants to know, you http://www.ams.usda.gov/. should research if the test can be performed and the cost. If, in your Nutrient data bases opinion, the need for the information is The foundation of most public and critical to protecting children's health, commercial nutrient databases in the then your school should pay an U.S. is the USDA Nutrient Database for independent lab to perform the test. Standard Reference (SR). The SR has been in continuous existence in printed Testing for meat species or electronic format for over 100 years. Do you ever wonder if a processed The Nutrient Data Laboratory (NDL) of meat product is all beef or part pork the USDA's Agricultural Research and chicken? The term "all meat" is of Service, Beltsville Human Nutrition concern to a lot of purchasers after all, Research Center, is responsible for this squirrel and kangaroo are meats. A data base. laboratory analysis can determine the Unrounded, unadjusted data are species of meat in a product. The cost required. Analytical or database data is approximately $200 per species. A are accepted. Seventy nutrients are laboratory test cannot tell what currently released. Data may be percentage of each species is present in published by brand name. There is no the product. fee associated with submitting data to Often school purchasers want to Nutrient Data Laboratory. The SR data verify the percentage of vegetable are available online at protein to meat in a product. To make http://www.nal.usda.gov/fnic/foodcomp/.

154 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE LABORATORY TESTING OF PRODUCTS FIRST CHOICE USDA/FNS recognized that school South Nova Road, Ormond Beach, FL food authorities need accurate, reliable, 32174, Attention: Keitt Moore, complete, and centralized nutrient data. telephone1-800-777-2924 extension 170. FNS in cooperation with the Schools must have an approved nutrient Agricultural Research Service (ARS) analysis software program to access this developed the Child Nutrition (CN) data base. Database for use in nutrient analysis of school meals. Validity of nutrient The CN Database contains five information component files: the standard reference School purchasers should learn to file (SR), a file of USDA commodities, a ask the correct questions when file of the USDA quantity recipes for discussing nutrient information schools, a brand name processed foods provided by manufacturers. Here is a file, and a file containing the USDA list of some questions you might ask. Food Buying Guide. These files are Is this nutrient analysis based on locked, which means that the chemical analysis? information in those files may be accessed and copied but may not be If yes, how many samples were altered by the local user. Food analyzed? identification codes or numbers are Were samples raw ingredients or reserved for use in the CN Database. the finished product? FNS recently contracted with Sales If raw ingredients were analyzed, Partner Systems, Inc. (SPS) to manage was the test based on a profile of the CN Database. SPS is a working raw ingredients or was it partner with the International Food conducted after the ingredients Distributor's Association (IFDA) and were mixed and prepared for currently manages a database of more packaging? than 35,000 food service product descriptions for over 260 manufacturers. Does the analysis consider changes Because numerous processed in the food during preparation? products are used by schools, If not based on a chemical manufacturers are encouraged to submit analysis, what data base was used nutritional information for their to make the calculation? Was the products to SPS so they can be added to product analyzed under Federal the CN Database. This saves data entry regulations for a Nutrition Facts time for local schools and makes label? nutritional information on those products available nationwide. SPS has School purchasers should focus on a fee schedule for this service. For this thought when working with information on the fee schedule and nutrient analysis: Not all nutrient details on how to submit data, analysis of processed foods is accurate! manufacturers may contact SPS at 757 Ask questions and have a trained

155 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 12 CHOICE nutrient analysis professional review the powers to convince company officials information. that a recall is needed. The action is sometimes viewed as an alternative to Food Recalls an agency seizure or detention action to Food products recalls can be a remove or otherwise correct adulterated serious concern for consumers. Some or misbranded products. reasons for recalls are serious, while Recall classifications others are less worrisome. The If FDA or FSIS undertakes the task to following information promotes better have a company recall a product, the understanding of the recall process: recall will be categorized into one of the following classifications: What is a food recall? A food recall is a voluntary action by a manufacturer or distributor to protect Class I Recall: Used in the public from products that may situations where there is a cause health problems or death. reasonable probability that Who regulates food products? use of or exposure to a The Food Safety and Inspection product will cause serious Service (FSIS) of the U.S. Department of adverse health Agriculture (USDA) inspects meat and poultry products. FSIS is responsible for consequences or death. ensuring that these products are safe, wholesome, and accurately labeled. Class I Recall: Used in situations FSIS also inspects all pasteurized egg where there is a reasonable probability products under 21 CFR160.105(eggs that that use of or exposure to a product will have been removed from their shells for cause serious adverse health further processing) produced in consequences or death. Federally inspected plants. All other Class II Recall: For cases in which food products, other than those use of or exposure to a product may regulated by FSIS, fall under the cause temporary or medically reversible regulatory authority of the FDA. adverse health consequences or where the probability of serious adverse health is remote. Neither the FDA nor the Class III Recall: Employed when use USDA has authority to of or exposure to the product is not likely require a recall without to cause adverse health consequences. obtaining a court order. In addition to recalls, these actions are available to a company that decides Neither the FDA nor the USDA has to regain control of product already in authority to require a recall without distribution: obtaining a court order. In practice, the Market withdrawal: Used when FDA and FSIS use their persuasive there is a minor violation that is not 156 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE LABORATORY TESTING OF PRODUCTS FIRST CHOICE subject to legal action by FDA or FSIS, could contribute to a clinical or when the company wished for some situation that could expose other reason to retrieve product from humans or animals to a health distribution; e.g., the product does not hazard meet the company's internal The degree of hazard to various specifications. population segments likely to be Stock recovery: Employed to exposed to the product, recover product that has not been particularly to those people at placed in retail distribution channels greatest risk but is still under the manufacturer's direct control on its own premises or in The seriousness of the health warehouses from which the company hazard to which populations at can assure there will be no distribution. risk would be exposed Correction: Covers steps taken to The likelihood of occurrence of the repair, modify, re-label, or otherwise hazard adjust a product so that it may remain An assessment of the in distribution. It may also mean consequences (immediate and destruction of a product with regulatory long-term) of the hazard concurrence when the product may cause serious harm. Legal responsibility for product Health hazard evaluation and classification safety and wholesomeness rests with If a recall is to be made, the the officers and employees of a food government agency, not the company, manufacturing company. It is in the classifies the recall. Once notified of a best interest of company and consumers product defect, FDA and FSIS will to have a system in place that assures evaluate its potential seriousness. FDA's the smoothest possible handling of any guidelines state that an ad hoc product withdrawal, stock recovery, or committee of FDA scientists will recall that may take place. The USDA/FSIS maintains a website If a recall is to be made, the related to recalls of meat and poultry products. For additional information on government agency, not the recalls, contact the Food Safety and company, classifies the recall. Inspection Service Recall Information Center website at http://www.fsis.usda.gov/OA/recalls/rec_intr.htm. evaluate the health hazards presented by a product being considered for recall, taking at least these factors into account: Food Safety and Inspection Whether disease or injuries have Service Recall Information resulted from use of the product Center website at Whether any existing conditions http://www.fsis.usda.gov/OA/recalls/rec_intr.htm.

157 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE

FIRST CHOICE CHAPTER 13 Receiving and Storage cPractice School, distributor, and manufacturer personnel can tell plenty of stories about food quality problems. Breakdowns in receiving procedures cause most of the problems. A product different from the one ordered arrives on the receiving dock, and you’ll hear remarks like these:

"We're doing so much to improve our "What do you think she meant by that purchasing process, but I think we're statement?" losing the benefits at the back door."

"XYZ brand of grilled chicken has a rubber "That precut lettuce they are texture. I am going to take this product off purchasing is soggy and limp." the approved brand list."

All of the current references and larger districts where duties are divided. training materials focus on the basics of The communication breakdown occurs receiving, such as counting and when these functions are separated. weighing. While these are important More sophisticated approaches to aspects of a receiving program, the receiving are necessary. foods that most schools use today Most school purchasers use technical require more than a pair of scales to specifications grams of fat, bacteria evaluate quality of food delivered. count, percentage of white meat to In schools where the site manager dark. To determine whether products does both purchasing and receiving, the meet these specifications requires receiving process is simpler than in sophisticated laboratory equipment.

159 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE With the current status of federal and If so, feedback from receiver to state budgets and other pressing purchasing will be very limited. priorities, funds for expensive laboratory equipment or contracts for "This frozen broccoli has freezer burn, laboratory testing at each school site are which I believe is evidence of a break in

only a dream. the cold chain. I really should report this

Most school districts provide site to purchasing, but that means I have to managers with a list of the products fill out that two-page form." with brand and code numbers that appear on the bid award. Some "I called and told them that the roast was purchasing departments generate lists not the right product. They told me to fill only for those items in a specific out the form, but it's time for serving to delivery. start. I must remember to fill out that product complaint form after lunch." "The driver is in such a hurry that he barely allows time for me to count the Old schools are stuck with

boxes." antiquated delivery docks, but something is wrong when new schools are built with an outdated concept of "This list has over 200 items on it. How am I food delivery. This conversation could supposed to locate the brand and code take place between two drivers for any numbers for those items I ordered? The driver is standing over me anxious to move food service distributor serving the on to the next stop." school market today.

The limited use of computer "Can you believe I have to back the truck technology in purchasing restricts the across a playground to get to the loading

information available to the manager dock at those schools in Acorn County?" prior to delivery. The use of technology

to communicate rapidly with widespread "At Oak school it's easy to access the locations could greatly improve the loading dock, but can you believe that new receiving function. Some districts are school was built with a loading dock? The beginning to see the need to provide this frozen and refrigerated items have to be feedback to sites, but often the tradeoff carried up five steps." is extended lead times for order placement, which creates a different set "I guess no one noticed that schools now of problems. The chapter on product use more frozen and refrigerated items, movement discusses problems created or that food delivery trucks now have by excessive lead time. three doors." Most purchasing departments or school food service administrative offices have a system for reporting product problems, but it may be too complicated.

160 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE INFORMATION Receiving personnel must know how to take food temperatures at the point of The essentials of a receiving receipt. The increase in the use of frozen procedure that ensures quality control and refrigerated items in school menus with no missing links: makes it essential to check every delivery. Receiving personnel also must know how to recognize signs of a break in the The essentials of a receiving cold chain. The temperature can be correct at the time of receipt, but if it has procedure that ensures been mishandled at some point in the delivery cycle (a break in the cold chain), quality control with no the product quality may become inferior. missing links: INSPECTING Competent personnel MERCHANDISE Appropriate equipment Merchandise is inspected for two Proper facilities reasons: 1) food quality and 2) food safety. Let's look first at food safety. Communication relating order to More operations are using a Hazard delivery Analysis and Critical Control Points Simple feedback systems with (HACCP) system to ensure food safety. appropriate follow-up Implementing a HACCP system into a food service operation begins with Train receiving personnel in the purchasing, receiving, and storing foods following procedures: correctly. Receiving is a control point in Taking food temperatures when the operation. Employees must be received trained to inspect shipments for spoilage and other contamination. Inspecting and storing deliveries The following guidelines are immediately designed to ensure that safe products Reading food labels are received: Following district clerical Inspect the delivery truck. Is it procedures clean? Are there odors? If refrigerated, is it at a temperature Reporting product quality that protects the safety of the problems food? Problems with the delivery Checking products delivered vehicle may point to larger food against products ordered safety issues with your supplier.

161 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE the quality standards of the school district. The components of the inspection for quality are based on the quality control part of the purchase plan. If your school district uses a food description without brands when the price is obtained there are many things which must be checked when the product is delivered. The quality factors which must be checked are found in the food descriptions. They could be such things as: Does the product have a CN label? Is the hot dog made of chicken, A well-equipped receiving area is clean, has a small table or desk, thermometer, and two-wheel truck. pork, beef, or maybe some combination? Check temperatures, paying particular attention to frozen and What is the length of the french refrigerated products. Chilled fries? products should be received at 41 What size are the green peas? degrees F or lower, and frozen products should be received at a What is the grade and size of the temperature of 0 degrees F. These fresh tomatoes? foods are usually considered potentially hazardous foods; Many school districts use a food microorganisms flourish under the description with approved brands when right conditions. the price is obtained. The inspection for quality is much simpler for those Look for signs of contamination schools. If the product is classified as and container damage (e.g., water distributors choice brand approval then stained, dented, crushed, taped it is only necessary to check that it is shut, bulging or leaking canned the product that was ordered. The goods). Reject these packages school district does not control the their contents may also be brand delivered. If it is a canned or contaminated or damaged. frozen fruit or vegetable it is probably Check for contamination between one of the brands of the distributor raw and ready-to-eat or prepared buying groups. Appendix 11 has foods during transport. information on these labels, the school must check that the label is for the Once food is inspected for food quality the school ordered. Many of the safety it must then be checked against more expensive products purchased will

162 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE be purchased with a specific brand and STORING FOODS code number. Most of the quality check was completed when the brand and SAFELY Proper storage is crucial to maintain code number were approved, all the the freshness and quality of the food receiver has to verify is that the received. Therefore, equipment in approved brand and code number were storage areas must be in proper working delivered. order, clean, and ready for storage of The temperature at which a school products. A few guiding principles accepts a product may be lower than apply when storing food: the temperature recommended for food safety reasons. As an example precut FIFO - Use the First In First Out principle to make certain that The temperature at which a products are used in the order they are received. Older products school accepts a product should be used first. Place new may be lower than the deliveries behind older stock. temperature recommended Store product in original for food safety reasons. packaging. If repackaging is needed, clearly label and date the product. Be certain the packaging produce items or milk are safe at 41 is food-grade material. degrees Fahrenheit, but most people want to drink milk that is colder. In Keep raw food separate from order to maintain quality, the cooked or ready-to-eat products. recommended receiving temperature for Ideally, two refrigerators work well precut produce is lower than 41 degrees for this purpose. Keep raw meat in Fahrenheit. The receiver should review one and cooked or ready-to-eat the school district purchasing products in another. When this is descriptions to find the correct receiving not possible, store cooked and temperatures related to quality. ready-to-eat foods above raw meat, poultry and fish. Store foods at least six inches off The receiver should review the floor and six inches away from the school district the wall. Keep storage areas clean and dry. purchasing descriptions to These areas should be cleaned on find the correct receiving a regular basis. Storage areas should be regularly temperatures related to inspected and treated by a Pest quality. Control Professional (PCO).

163 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE Clean equipment used to transport separately, away from food storage and stored foods (i.e. carts, trays etc). preparation areas. Ideally chemicals should be stored in a locked cabinet or Store food in the appropriate room. Keep chemicals in their original storage area. Chemicals should not containers. be stored near food, but in a separate storage area.

Types of Storage

Refrigerated Storage: Refrigerators should hold foods at 41 degrees or below. Check the temperature of the refrigeration unit by placing a thermometer near the door, which is the warmest section. The air of the refrigerator needs to be lower (33 to 36 degrees F) to hold food at the appropriate temperature. Check internal temperatures of refrigerated foods regularly, and do not overload the unit. When taking the temperature of precut produce the produce bag should be folded around the thermometer stem. Frozen Storage: Keep freezer temperatures at 0 degrees F or below Thermometers and check internal thermometers One of the critical factors in regularly. Place frozen deliveries in controlling pathogens in food is storage as soon as they have been controlling temperature. Disease- inspected, using the FIFO method. Store causing microorganisms such as in original containers, or re-wrap in bacteria, viruses, and parasites grow food-grade, moisture-proof packaging. very slowly at low temperatures, multiply rapidly in mid-range Dry Storage: The ideal temperature of temperatures, and are killed at high dry storage is 50-70 degrees F with a temperatures. For safety, perishable humidity level of 50- 60 percent. Keep foods must be held at proper foods at least six inches off the floor temperatures to inhibit bacterial growth and six inches away from the wall. or cooked to temperatures high enough Store food in original packaging or to kill harmful microorganisms. A transfer to a food-grade, tightly covered thermometer is essential in every step container. during the flow of food - beginning with receiving. Chemical Storage: Cleaners, sanitizers Food thermometers come in several and other chemicals should be stored types and styles and vary in level of

164 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE technology and price. Some 2. Submerge the thermometer so that thermometers are meant to stay in the the sensing end is completely food while it's cooking; others are not. covered. Do not let the stem touch Some, like digital thermometers, are the sides or bottom of the ideal for checking thin foods. Others, container. Wait at least 30 seconds like the large dial thermometer many before adjusting. people use, are really meant for large 3. Without removing the stem from roasts and whole chickens and turkeys. the boiling water, use a small The most commonly used wrench to turn the calibration nut thermometer is a bi-metallic stemmed under the dial until the pointer thermometer, accurate to +/- 2 degrees stops at 212 degrees F. Some F. All thermometers should be digital thermometers have a reset calibrated for accuracy regularly. There button. Reset the thermometer are two methods for calibration - the ice while it is still in the boiling water. point method and the boiling point method: The USDA/FSIS website has a section on various types of Ice point method: thermometers, their advantages and 1. Make a slush of ice and water in a disadvantages. To access this container. Fill a large glass with information visit the website at: finely crushed ice. Add clean tap http://www.fsis.usda.gov/oa/thermy/kitchen.pdf. water and stir. 2. Submerge the thermometer so that Numbers on labels the sensing end is completely The numbers on food service labels covered. The thermometer should or wholesale food products are not be touching the sides or the important to the receiver. The numbers bottom of the container. Wait a on meat products and pre-cut produce minimum of 30 seconds before are most critical. All pre-cut produce adjusting. has a pack date. The pack date will 3. Without removing the stem from vary by the supplier, but all receivers the slush, use a small wrench to should know the significance of this turn the calibration nut under the date. Meat products have several dial until the pointer stops at 32 numbers which the receiver should degrees F. Some digital recognize on all items delivered. The thermometers have a reset button. numbers on meat products: Reset the thermometer while it is still in the ice water slush. Establishment number Product code number Boiling point method: Run number or date number 1. Bring clean water to a full rolling boil in an appropriate pot. CN label number

165 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE The establishment number identifies line that made the product, as well as the plant where the product is the date. This number is important in manufactured. This important number the receiving process only when a is discussed in the section on approval problem with the product is identified. of brands. The receiver should Receivers reporting a problem with a recognize and use this number when product must understand they need the communicating a product problem to a purchasing department or food service administrative office. The date code is stamped An exception is meat between two on the case at the time the pieces of bread, which may not carry an establishment number. When meat product is manufactured. becomes a sandwich, it moves out of the control of the United States date code. When manufacturers are Department of Agriculture, Food Safety contacted about product problems, the and Inspection Service. When first thing they want to know is the run purchasing a product such as a ready- or date code. With the code number, to-heat sandwich, the receiving staff they know if the product is old enough should know that it may not have an to have developed quality problems, if establishment number. Some companies they have had other complaints about choose to produce sandwiches under product manufactured that date, and voluntary inspection, these sandwiches where the other product from that date will carry an establishment number. was shipped. The product code number is The CN label number is not used assigned by the manufacturer and is routinely in the receiving process. CN used to identify a specific product. The labels are important to brand approval. manufacturer controls product code The receiver should recognize this assignments. This number is the means number as well as the run or code date of identifying the product that was in case of a question about the quality approved under the bid or price quote. of a product. The CN label number is For example, a manufacturer may assigned by USDA and is unique to produce several different chicken each product produced at a specific nuggets, but each product will have a establishment. unique number. This number tells the See Appendix 9 for a sample meat receiver whether the product delivered label you can use to train receivers to was the product ordered. check the numbers. The run number or date code is easy Each school district has a system for to identify. All other numbers are communicating the brand and code printed on the label, but the date code numbers of products approved during is stamped on the case at the time the bid or price quote awards. Most central product is manufactured. This number purchasing systems have a method for may identify the shift and production communicating delivery problems.

166 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE Training in use of this system is weight. The only reason to weigh is if it essential for all receivers. Just giving appears that the sack has been opened staff a procedure manual is not and some product removed. As the sufficient if good feedback is one of the trend moves very rapidly toward goals of the central purchasing unit. prepared produce, even weighing this product will not be an issue. The receiving area Most bids or price quotes call for The equipment necessary in a food products to be delivered to the receiving receiving area: A two-wheel truck to move product to permanent storage When was the last time you A thermometer of the appropriate saw a two-wheel truck type for all foods received A flat surface on which to work designed for moving cases in a school kitchen? This No scales? Not necessary, because the group of products commonly called essential piece of "catch weight" items has diminished to equipment should be a part fewer than five in most operations. Many catch weight items are weighed at of every receiving area. the manufacturer, and the weight is recorded on the box. The labeling of food products is so regulated by government agencies that it seems a waste of time for school receivers to check whether there is 10 pounds in a 10# box. Few manufacturers would risk damaging their reputation by shorting weight on a case of food product. Schools that operate food preparation facilities where they buy a lot of whole cuts of meat might need scales, but those operations are the exception rather than the rule. What about fresh produce? Does a 50# sack of cabbage always weigh 50 pounds? No, it depends on the season of the year and the growing region. A 50# sack of cabbage may weigh 53 pounds or 48 pounds. It will always be A two-wheel truck is an essential piece of equipment. billed and accepted as 50#, regardless of dock. That's all. Asking a driver to put

167 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE invoice for a food and supply order to a single site? Almost always it is more than one page. Have you tried juggling a clipboard, a receiving report, and invoices while bending over to count? Every receiving area should be equipped with a flat work surface for papers. It could be a small desk, a shelf attached to the wall, or a rolling cart with a flat top. Can you imagine a computer screen where you key the number of cases as you count and the price flashes up so you can compare it to the extended total on the invoice? As sophisticated computers come into the receiving area, this will become reality.

Receiving area design Different types of portable conveyors are used to unload Restaurants give some thought to deliveries in flat receiving areas. grocery delivery during site selection. Drive around the fast food and chain product on the shelves in dry storage or restaurants in your area. Do any of in the freezer or refrigerator adds to the them have receiving docks? The truck cost of delivery. Expect to pay more if can access the property without any you call for this service. Many backing. It can come in one entrance, distributors computerize truck routing circle the restaurant, and go out the systems, and the time allowed for each same entrance. delivery is based on the number of Personnel who design school sites cases shipped and the miles between and buildings have so much to think stops. Even if your instructions call for about that the delivery of groceries is storeroom or freezer placement, you often forgotten. School purchasers must may experience problems in achieving become advocates for improved access your goal. for food delivery vehicles. As the When was the last time you saw a number of distributors continues to two-wheel truck designed for moving decrease schools must do everything cases in a school kitchen? This essential possible to make their business easier piece of equipment should be a part of to service. The food in school food every receiving area. Is it any wonder service has changed over the years. that personnel complain about having Schools now use less dry and more to move merchandise to the appropriate frozen and refrigerated product. Look at area? the trucks that deliver groceries. The How many pages is the typical typical food delivery truck has two

168 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE delivery driver to wait while the receiver searches through a list of 200 items to find the brand and code number for the products being delivered? The traditional way of communicating the bid awards is too cumbersome. That's why site receivers disregard the policy of checking all brand and code numbers before signing the invoice. The task and the tools available make it an impossible job.

Receiving technology The most frequent complaint about school bids: "They awarded one item and allow the distributor to deliver another." If we are to overcome the problem, we must have technology that Distributors are shrink wrapping mixed loads in order to decrease unloading time and movement on the truck. doors. The door in the back is for dry The most frequent product, with one or two doors for frozen and refrigerated product. Take complaint about school the time to observe a food delivery at a bids: "They awarded one chain restaurant. The truck most likely pulls up level with the back door. item and allow the Product can be removed from any of the distributor to deliver doors and moved into the restaurant without going up any steps. another." A few distributors are beginning to shrink wrap (wrap in clear plastic) the entire order for a site. Often when makes it possible. shrink wrap is used there is an Facsimile machines have become agreement to accept the order without very inexpensive. Even better than a fax checking the contents. The school is machine is an online system that allows released from liability for the accuracy the site to download and print their of the order and followup is completed receiving report on the computers used via phone. This delivery procedure can for meal counts. Most purchasing reduce distributor cost and therefore departments or central food service result in lower cost to their customers. administrative office have computers. A Can you imagine the frustration receiving report that lists the quantity when a site receiver wants the hurried and brand/code number must be

169 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE available to every site on the day a delivery is received. The missing link in A feedback system must be the purchasing chain receiving must be closed. simple for school receivers What about school districts that to use it repeatedly. don't put brands and code numbers on their bids? The receiver has a set of the specifications, and that employee is administrative offices are using the expected to check products against telephone system to simplify their those specifications. communication with site receivers. Even a trained food technologist Forms the site receiver must complete could not verify the accuracy of to report a delivery or food quality products delivered against a problem are disappearing. The specification without a laboratory and increased availability of voice mail is adequate time. The most effective efficient for managing reports from site approach to improve the receiving receivers. Some administrative offices process is to award food bids on brand have added a special box for receivers and code number. to report problems. The special mail box is checked twice daily. The Product feedback increased use of computers with communication links between the schools and administrative office also offers the opportunity to use electronic mail for communicating problems related to receiving. Three potential solutions to this problem are widely used in schools: If you are fortunate to have all of your sites computerized, use electronic mail to develop a feedback system. Train a person in the Receiving clerk using e-mail to solve a problem created by a short/out on the order just received. purchasing department or central food service office to take phone calls and record A feedback system must be simple all comments. Use voice mail to for school receivers to use it repeatedly. reduce phone time. It must be fast and easy for them to advise administration of problems with Use a simple form for comments, delivery. Innovative school district such as a card with blank lines.

170 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE RECEIVING FIRST CHOICE The card should not have questions, just a place for them to Follow-up is the key to write. A card or piece of paper with a lot of questions is too much quality control in receiving to expect the site receiver to deal food products. with. Providing feedback should be as simple as possible. must make an on-site visit to verify the accuracy of the complaint, then do it A complaint form is not included in immediately. Follow-up is the key to this manual. Operators verify that site quality control in receiving food receivers do not take the time to fill out products. If a problem is so complex complaint forms until the problem is that it will take time to resolve, advise completely out of control. Every the staff who took time to report the complaint about a problem with a problem about steps being taken. product should be investigated. At times only a phone call is necessary. If you

Summary

We can't expect perfection, but we can achieve consistent control. Receiving food prod- ucts willnever be perfect. The product will never be 100 percent consistent. Remember the saying, "Notwo chickens are exactly alike." The receiving staff will not always work at maximum efficiency, and equipment will not always work correctly. What is important is consistent control that assures food products received are food products ordered. These products should be received and stored properly to minimize food safety hazards. The very best purchasing system fails at the point where the receiving system fails. The most effective purchasing system is a system where all the parts work together to achieve the objective of cost-effective service to children.

171 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 13 CHOICE Notes

172 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE CHAPTER 14 Purchasing Cooperatives cPractice

Health care and restaurant franchises have been quicker than schools to join purchasing cooperatives. This dialogue explores some of the reasons schools have not joined cooperatives.

"I know, I have mixed thoughts. I need to "I am not sure about all this reduce cost, and from all reports that conversation related to forming a probably would be possible if several small purchasing cooperative." and medium size districts combined our

purchasing dollars."

"I have heard reports that the cost of "I read an article that indicated that administering the cooperative exceeded building a warehouse was what usually the cost savings." caused that problem."

"I read that same article and they said that the cooperative had to be large "Yes, but the article did not say how big." enough to gain the attention of

manufacturers."

"One of the things I worry about is losing the flexibility to try new "I talked to one supervisor who said you do products. With a captive audience it is have to be flexible in the products you use important that I introduce new foods to gain the price advantages of joining a cooperative." often in order to keep the customers from getting bored."

173 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE

"Yes, a supervisor told me that joining the cooperative forced them to find "I have heard several people say that new ways to use products, rather than joining a cooperative saved them time and purchasing a different product. She said therefore they had more time to devote to the cooperative provided a lot of other tasks like marketing and food assistance in finding new, more flexible presentation." products."

"I have to be honest and admit that one of the reasons I am resisting joining a "The other day I went by the county co-op cooperative is that I do not want to to buy some tomato plants and I thought give up control of the purchasing task. I to myself, this is a perfect example of a realize I have to overcome that bias, successful cooperative. The county co-ops because food has gotten so complex I were formed by farmers many years ago to need help in writing product get better prices and quality in seed and descriptions and using some of the other farming needs." more innovative purchasing systems."

"I would have to convince the "Almost everyone you talk to who has superintendent and school board that joined a cooperative says they would never we should join." go back to purchasing as an independent."

"Selling them would be just like everything else you present. I "Perhaps we could use the need to apply understand the cooperative principles of food safety to the purchasing administrator gives you a lot of support function as a reason to join a cooperative." in developing your presentation."

"Evaluation of vendors and product protection is an area of practice where I need additional support."

The food service administrator in sanitation supervisor, and technology most school districts must be a specialist. Large school districts may combination of nutritionist, accountant, have a staff of individuals who personnel manager, maintenance specialize in each of these areas, but in supervisor, food technologist, food small and medium sized districts the

174 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE limited number of staff and the buying more than 60 percent of their diversity of skills required present some food purchases through cooperatives. complicated opportunities. Information Purchasing cooperatives offer a Today the typical food service partial answer to the product operation purchases more than 500 food knowledge dilemma. Each member of a items to meet the demands of students purchasing cooperative brings to the and other customers. With the purchasing team a knowledge of continuing development of a wide array products for the collective benefit of all of processed food products, it is school districts. Furthermore, the impossible for one person to keep adequately informed of the products available. Just when you think you Purchasing cooperatives understand the characteristics of a product and can determine offer a partial answer to the comparability, the manufacturing product knowledge process or ingredients change. When analyzing this dilemma you realize that dilemma. Each member of a chain restaurants do not develop food purchasing cooperative descriptions in the local units. One of the things the franchise fee buys is the brings to the purchasing expertise of the corporate headquarters staff. team a knowledge of Schools do not have corporate products for the collective headquarters. Perhaps purchasing cooperatives can serve in this role. benefit of all school The 1996/97 USDA school districts. food purchase study indicated the share of school districts participating in cooperative benefits of purchasing cooperatives can buying programs had grown extend beyond purchasing. When food dramatically since the 1984/85 service administrators meet to work on study. In 1996/97 more than cooperative business, they can use the one-third of all public school opportunity to address other problems districts participated in cooperative in their school districts. buying compared to fewer than 10 A purchasing cooperative's success percent in 1984/85. The study further depends on the flexible attitude of its indicated that, although small school food service administrator members. districts are the most frequent Members need to accept some changes participants in cooperative buying, in order to reach a cooperative's full almost one-fourth of the large districts potential in terms of cost savings, took part. Participating districts reported service and quality improvements.

175 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE Complete a comparison of products currently used by each A purchasing cooperative's school district. success depends on the Plan and attend a product flexible attitude of its food knowledge improvement workshop. service administrator Develop common descriptions of members. the products to be purchased. Develop common formats for bid Flexibility can be minor the way forms. granulated sugar is packaged, for Screen products for prior approval example or as complicated as choosing of brands. the ingredients for a chicken nugget. Each of the school district If state law permits and vendors representatives in a newly created co-op agree, one school district could must make a strong commitment of purchase at the price bid for time for the first two years. During the another school district. first year, combining the product lists The group could issue one bid and and specifications, testing products and receive one response from the projecting quantities will take the most vendors, with each local school time. Each food service administrator district (or school board) making a must be satisfied with quality decisions separate bid award. of the cooperative since the administrator's primary responsibility is Although school districts can make the quality of the food served in the improvements through cooperating, real individual districts. cost savings will not be realized until a single purchase entity is formed. Cost Cooperating without forming savings and service improvements reach a cooperative maximum potential when the There are many ways school districts economies of scale are applied. can cooperate to improve the purchasing process without a legally Legal counsel constructed purchasing cooperative. Legal counsel with Working together on common purchasing experience will purchasing projects allows a group of be necessary to the co-op. school districts to determine if they Most state laws require would like to move to a more formal some type of formal purchasing cooperative. agreement between districts Some of the common purchasing who join a cooperative. The projects which schools can implement: laws related to cooperatives vary widely

176 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE

Most state laws require To maximize buying power, some type of formal the group should reach agreement between agreement on the products districts who join a that are purchased. cooperative. (2) The bid should be awarded to only among states. One of the first steps in one brand. forming a purchasing cooperative is to (3) All districts must purchase the research the laws of your state. Having brand awarded the bid. the assistance of legal counsel with purchasing experience during this Consensus should be reached on process is important to success. as many products as possible. In addition, increased competition Member school districts should and the resulting drop in food costs never purchase items off the lowers vendors' tolerance for errors in cooperative bid, if a similar bids. Vendors overlook bidding errors product is available on the for a single district, but press a point cooperative product list. with a cooperative. Most cooperatives will require counsel during the bid Member school districts award process. should never purchase Guidelines for successful items off the cooperative purchasing cooperative bid, if a similar product is operation available on the cooperative In a traditional food purchasing market, a small or medium-size product list. district has to purchase whatever is available. Changing to a Cooperatives should provide a cooperative gives the member method for member school districts a combined buying districts to purchase all items volume that allows them to necessary to produce their menus. influence some of what is A cooperative that provides a available in the market place. To means for purchasing only the maximize buying power, the group high volume products could should reach agreement on the increase the total food cost for products that are purchased. As an member districts. The member example: school districts could pay more for (1) Five brands of breaded chicken low volume items because the nuggets are approved. minimum order size decreased.

177 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE Although manufacturer's or distributor's management supports A cooperative that provides a cooperative's objectives, distributor's sales representatives a means for purchasing only may see a threat of reduced the high volume products commissions. The street representatives and broker could increase the total community tend to try the "divide food cost for member and conquer" approach with new cooperatives. districts. Informed upper management and school boards are essential to the success of a cooperative. Many After the initial organization year, sources will pressure the school the member school district should district representative to the not be required to forecast the cooperative and, if unsuccessful, quantity it will purchase each year. will try to escalate the issue The cooperative should be able to upward in the organization. If use historical data to predict the upper management and the school quantities required. The board are informed they will cooperative should monitor the support their representative. Early quantities purchased against indication of understanding and quantities bid. support will discourage opponents Operating a certain way over a from going over the cooperative period of years creates a comfort representative's head. zone. Change makes people A central menu for the cooperative uncomfortable. Natural resistance is not necessary to operate to change often prompts school successfully. If a central menu is a food administrators in other long- term objective of the districts and the vendor cooperative, delay implementation community to try to "divide and of the menu for a minimum of two years. During the formative years Change makes people of a cooperative there are many issues on which the member uncomfortable. districts must reach consensus. Reaching consensus on menus is conquer" the cooperative. To not critical to success. It is best to combat this, during the formative delay this discussion until the stage the cooperative should elect member school districts have a single spokesperson and refer all developed strong working questions to that individual. relationships. A new cooperative

178 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE group, like any group, can be explain how the bid award overwhelmed by too much change. decision will be made should be The cooperative can maintain one very clear. Will one bid award be nutrient data base for the made, or will each member school commercially purchased items to support the member school districts' menu planning. The quality of the first The cooperative should analyze "request for prices" delivery requirements (directly to a influences, to a large food preparation site vs. a central warehouse or storeroom) for degree, the cooperative's consistency. An easy method for analyzing delivery requirements is reputation. to determine the average invoice amount for all sites. Study district make a separate award? carefully wide variations in the Good communication with average invoice amount of a potential vendors is very important delivery. Large central preparation at this step in the process. kitchens and school districts that Convince vendors that member operate central warehouses, with school districts are speaking with the capacity to receive full- or one voice. mixed- truckloads of products, often result in large average The majority of cooperatives have invoice amounts. Including these member school districts place their large delivery sites in the same bid orders directly with the successful with smaller delivery sites vendor. In order to better manage probably is not feasible. the business of the cooperative, a long range objective should be to Determine which steps in the use technology to manage order purchasing process are controlled placement for the total by the local school board and cooperative. which are mandated by state law and apply to all member districts. State laws and the local board In order to better manage processes that cannot be changed the business of the influence the time lines and cooperative, a long range procedures of the cooperative. objective should be to use The quality of the first "request for technology to manage order prices"influences, to a large degree, the cooperative's placement for the total reputation. The instructions that cooperative.

179 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE Choosing a purchasing the administrator for other districts. cooperative administrator Other potential cooperative Each cooperative will struggle with administrators include a non-profit the daily details of management. organization, a professional association, Cooperatives have to make product a State Department of Education, the movement decisions. Will orders for State General Services Commission, a food and supplies, and the resulting college or university. The benefits of billing and payment, go directly from cooperatives are worth the efforts each school district to the vendor? Will needed to overcome the administrative the cooperative operate a warehouse or obstacles. have "Just in Time" delivery direct to Recently several cooperatives have the sites? hired a service provider (distributor). In One objective of the cooperative is some situations the member school to maintain low overhead costs. A districts have delegated some of the cooperative's administrative unit must task of cooperative administration to issue and award bids, handle contract this distributor. School districts should issues related to service or product be aware of the language found in 7 quality, track costs, and prepare for the CFR Part 3016.60 before adopting this next bid cycle. One approach is to approach. This section of Federal develop a list of duties and assign them regulations reads in part "(school/school districts) may enter into a contract with a party that has One objective of the provided specification information to cooperative is to maintain the grantee (school/school district)for use in developing contract specifications low overhead costs. for conducting such a procurement. In order to ensure objective contractor to the school district members of the performance and eliminate unfair cooperative. In this scenario a single competitive advantage,however,a person district typically does most of the work that develops or drafts specifications, for the other districts. requirements, statements of work, To sustain the success of a invitations for bids, requests for cooperative, a long-term administrator proposals, contract terms and is necessary. As cooperative members conditions or other documents for use gain product knowledge, the need for a by a grantee (School/school district)in food technologist will become obvious, conducting a procurement shall especially if the cooperative is very be excluded from competing for such large. A strong administrative unit procurements.Such persons are authorized to hire permanent staff will ineligible for contract awards resulting be necessary. from such procurements regardless of One potential answer to cooperative the procurement method used. administration is one district becoming However, prospective contractors may 180 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE provide grantees (school/school districts)with specification information related to a procurement and still compete for the procurement if the A reasonable size objective grantee (school/school districts)and not would be that you purchase the prospective contractor, develops or drafts the specifications, requirements, a truck load of a high statements of work, invitations for bid,and/or requests for proposals used volume product often to conduct the procurement." enough to guarantee the

Purchasing cooperative size distributor adequate Some of the benefits of a purchasing inventory turns. cooperative will be realized regardless of the size. When making a change it is important to make long range plans to gain the maximum advantage from the cooperative. The larger the cooperative the more flexible the members must be, but also the lower prices will be. One of the benefits of joining a cooperative is the ability to influence the products available from local distributors. A reasonable size objective volume item once every other week. would be that you purchase a truck When forming a purchasing cooperative, load of a high volume product often discussions with manufacturers and distributors will provide some valuable insight into this issue. The larger the cooperative the more flexible the The role of purchasing cooperatives in handling members must be, but also USDA Commodities Cooperatives often consider some the lower prices will be. involvement with USDA commodities as a service to the member school districts. enough to guarantee the distributor Below is information prepared by the adequate inventory turns. A truck of Office of the General Counsel,USDA on product is approximately 40,000 May 2, 2000. pounds. Meal equivalents in the range "May buying cooperatives handle of 100,00 to 200,000 will provide the USDA commodities on behalf of school volume to turn a truck load of a high food authorities?

181 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE If so, who is responsible for any distributor, or processor for any lost or commodities that are lost or damaged? damaged commodities. A buying cooperative is unlikely to qualify as a recipient agency. However, Scenario 2: The buying cooperative a buying cooperative may handle USDA is a separate legal entity with which the commodities in a number of distributing agency has an agreement to circumstances. The legal authority for distribute USDA commodities to its doing so and the responsibility for the member school food authorities. The commodities depends on the way the buying cooperative also has agreements buying cooperative is organized and on with its member school food authorities. the entity with which the distributing In this case, the buying cooperative acts agency holds an agreement. A buying as a subdistributing agency (see the cooperative's definition of "subdistributing agency" at may depend on State or local laws 7 CFR 250.3). If commodities are governing member school food damaged or lost, the buying cooperative authorities and cooperative is responsible for the donated organizations. A buying cooperative commodities until they are delivered to may be a separate legal entity or simply the member school food authorities (or an alliance of school food authorities to a warehouse, processor, or other that enter into an collective agreement party designated by the school food under which designated member(s) authority). agree to fulfill certain responsibilities on behalf of the group. Buying Scenario 3: The buying cooperative cooperatives that are not separate legal is a separate legal entity with which entities are probably the most common member school food authorities contract type of buying cooperative. to provide certain services like Below are a number of scenarios warehousing, distributing or processing under which a buying cooperative may commodities. The buying cooperative handle USDA commodities. itself then contracts with the warehouse, distributor, or processor. Scenario 1: The buying cooperative, The distributing agency holds an which may or may not be a separate agreement only with the member school legal entity, facilitates contracting by the food authorities and not with the member school food authorities by buying cooperative and delivers the negotiating favorable contract terms. commodities to the location designated The member school food authorities by the school food authority. then contract for the goods or services. In this case, if commodities are The distributing agency only holds damaged or lost, the school food agreements with the school food authority is responsible for pursuing a authorities. The member school food claim against the buying cooperative authorities are responsible for pursuing who would then presumably pursue a claims directly against the warehouse, claim against the warehouse or other

182 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE responsible party. This is similar to 8) Develop a draft of the cooperative situations in which a recipient agency bid instructions and product list. contracts with a processor for Submit the instructions to legal processing USDA commodities and asks counsel for review. Mail the draft that the distributing agency deliver the product list to potential bidders a commodities directly to the processor. minimum of three weeks before The recipient agency, not the the next step. distributing agency, is responsible for 9) Conduct a pre-bid conference to pursuing any claims for lost or damaged determine what brands the commodities once they have been potential bidders would like the delivered to the processor." cooperative to consider. This will be more successful if separate Steps to form a purchasing conferences with each potential cooperative bidder are conducted. (1) Research the alternatives and Distributors may not want to alert choose the cooperative competition to what brands they administrative unit. are considering this early in the 2) Research state law and take the process, and brands stocked by necessary steps to establish the distributors is proprietary cooperative legally. information. 3) Develop written Guidelines (see 10) Evaluate labels for compliance page 177-179) to guide the with specifications. Notify decision making of the distributors of rejected brands, cooperative. and give them an opportunity to 4) Develop a comparison of the submit another brand. products currently purchased by Manufacturers are a valuable member districts. resource during this process. 5) Negotiate which products will be 11) Purchase samples and conduct included in the cooperative bid testing. The testing should and their descriptions. A new include a narrative description of cooperative should seek advice the sample, a student taste test, from an experienced cooperative and occasionally a laboratory in the same geographic area. analysis. Always retain a portion 6) Estimate quantities of items that of all products tested to compare are to be bid. to the delivered product. 7) Evaluate the market place and 12) Notify distributors and possibly determine whether to sub-divide manufacturers of the results of or regionalize the bid to testing, and allow them to submit maximize competition. a new product or brand if a sample was rejected.

183 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE 13) Issue a final draft of the bid. later. It is better to delay and avoid Allow three weeks for distributor costly mistakes. review. The basic philosophy of cooperatives 14) Conduct a final pre-bid should be placing the food conference to answer any manufacturer, the food distributor, and remaining questions. This should the school district serving children into be a group meeting with all a winning position. Identifying volume potential bidders and should last customers is important to the no longer than one or two hours. manufacturer. Reducing the styles of 15) Make any necessary correction to products that must be stocked and bid documents, and issue a having fewer bids to complete reduce request for bids. Allow a distributors' costs. Improved quality, minimum of three weeks for the service, and the potential for reduced vendor to complete the bid. If costs are the benefits school districts you don't allow enough time, the seek. There are many benefits to price will be higher. working cooperatively to improve purchasing. 16) Open and award bids; schedule delivery.

The minimum amount of time The bid methods, between steps 1 and 16 is 18 months. administrative units, order In the early stages, develop a critical placement and other path with deadlines for completing each step. Problems are most likely at step 5 aspects of purchasing are as and 11. varied as the cooperatives. Delay step 15 until all issues are resolved. As a new purchasing entity, In Appendix 17, you will find you will establish your reputation in the a list of cooperatives and marketplace during the first bid period, some of the characteristics and reputations are difficult to change of each. The basic philosophy of cooperatives should be The bid methods, administrative units, order placement and other placing the food aspects of purchasing are as varied as manufacturer, the food the cooperatives. In Appendix 17, you distributor, and the school will find a list of cooperatives and some district serving children of the characteristics of each. into a winning position.

184 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PURCHASING CO-OPS FIRST CHOICE Summary

The complexity of products purchased, the dynamics of the market place, and the many demands placed on school food authorities make purchasing cooperatives an attractive alternative. A purchasing cooperative allows small and medium sized school districts to have more impact on the products available in the market place. The formation of a purchasing cooperative is a time consuming process. Critical to success is allowing adequate time to prepare and issue the first bid. As much as two or three years will be necessary from the acceptance of the idea to actually receiving the first delivery. The most critical decision will be choosing an administrative unit. An administrative unit should be chosen that will result in long term success of the cooperative. 2002

2003

2004

185 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHAPTER 14 CHOICE Notes

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Review of potential distributor vendor

Product line 1) Is this vendor a (circle the response): full line specialty special breed other? 2) What percentage of products required by the school are stocked? % 3) If awarding business on all-or-nothing basis by groups, how much time after bid award will the vendor require to have the additional items in stock? Physical facilities 1) Describe the receiving/loading area; can product be received/loaded in inclement weather without damage to packaging? Is this area refrigerated?

2) Describe the loading procedures; can trucks be loaded in inclement weather without damage to packaging; can deliveries be set and loaded in temperature appropriate space? 3) Cleanliness of floors? acceptable unacceptable 4) Storage of damaged product? acceptable unacceptable 5) Organization of product in slots? acceptable unacceptable 6) Cleanliness/orderliness of cold storage? acceptable unacceptable 7) Type of storage (circle those available): dry refrigerated frozen If several different temperature ranges, record the temperatures: 8) ) Pest Control acceptable unacceptable 9) Describe storage of used pallets:

Delivery equipment 1) What type of equipment is used? (circle one): dry only dry and frozen refrigerated only dry/frozen/refrigerated

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2) If using dry/frozen equipment and will be delivering chilled product (such as eggs and fresh produce), how is it handled? a. Placed in the frozen compartment with a thermal blanket. b. Placed in the dry compartment next to the freezer with a window for cool air flow. c. Other - describe:

3) How is product loaded? a. Slip-sheeted (wrapped in plastic on pallet) b. Stacked by customer order c. Stacked by product type d. Other - describe:

4) Do trucks have on-board computers for monitoring temperature in the storage area throughout the delivery? Yes No 5) Are the trucks clean? Yes No

Financial history 1) Request credit references from three major suppliers. List the name of the suppliers and have letters mailed direct to an accounting firm. a. b. c.

2) Advise the supplier that financial statements (balance sheets , income statements, cash flow statements) and a signed representation letter will be required. This material will be mailed to an independent CPA firm and will remain confidential.

Notes:

188 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE REVIEW OF POTENTIAL DISTRIBUTOR VENDOR

Supplier HACCP qualification standards What steps are taken to ensure supplier(manufacturer) compliance with safe food handling procedures? 1) Is there a standard questionnaire suppliers must complete? See page 195 of this appendix for a sample questionnaire. Attach a copy of the supplier’s questionnaire. 2) Is there a different approach to ensure supplier compliance with safe food handling procedures? If yes, please describe.

Service levels 1) Fill rate: from previous history, what percentage of your orders does this vendor fill? (Note: out- of-stocks are stated as a positive number; e.g. 97%.) a. Inventory outs (normally printed on invoice as out-of-stock)? b. Inventory shortages at order fill time (normally hand-marked out)? 2) If the vendor has no history with your school, what three schools can provide a reference? (ask question #1 of those schools): a. b. c.

Accounting practices 1) Are invoices computer generated; are they clear and readable? Yes No 2) Describe the procedure for issuing credit memos:

3) Describe the procedure for picking up products, if necessary:

4) Based on past history are the statements in an acceptable form and accurate? Yes No

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5) If your purchase system will use a vendor printed order guide, is this vendor’s form acceptable? Yes No Attach a copy. 6) If your purchase system will use a vendor utilization report, is this vendor’s form acceptable? Yes No Attach a copy. 7) Describe the order placement procedure:

Performance at and following pre-bid conferences 1) Describe performance at initial pre-bid conference. a. Knowledge of staff attending: acceptable unacceptable Staff preparation for conference. acceptable unacceptable Follow-up after conference. acceptable unacceptable b. Other 2) Describe performance at final pre-bid conference:

Cooperative information (for co-ops only): Vendor must deliver to all members of the cooperative (see Contract Section V). Is it necessary for the vendor to use a subcontract vendor? If yes, what members of the cooperative will be affected? Describe how such things as pricing, order guides, usage reports, product line, and problem resolution will be handled.

Signature of School Representative Signature of Company Representative

Date Date

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Supplier(Manufacturer) HACCP qualification standards

Supplier (Manufacturer)

Date Address

To suppliers (current/potential vendors): If your firm has a HACCP program, it is part of our QA program. It is very costly to receive a product or service from a supplier that does not meet expectations. Please answer the following questions and provide the material as appropriate concerning your company’s quality assurance plan and program to achieve each requirement. The supplier is expected to demonstrate effective and continual improvement.

1) Who developed the HACCP/QA program?

Who validated the program as effective?

Who are the members of the HACCP/QA team?

What are the qualifications of the HACCP/QA team members?

How often do they meet?

Describe the pre-ship verification program?

2) Has each employee who works with food been taught the hazards associated with the task he/she performs and how to perform the necessary controls? Attach material to support the answer provided.

3) What are suppliers required to do in terms of ingredient HACCP controls?

4) Please tell about recall and emergency action programs.

5) Describe the responsibilities of Quality Assurance/Quality Control Department.

6) Describe product testing procedures.

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APPENDIX 2

School district purchasing profile

General Information Name of school/district Mailing address Street address Food service director Name Phone Purchasing contact if other than director: Name Phone

Statistical information

Programs operated

Other programs:

Cooperative affiliation (if any)

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Comments: (insert such thing as growth trends, future program additions, new construction)

Food production and delivery requirements

Delivery requirements: Schools: Frequency of delivery Milk Bread Fresh produce Dry groceries Frozen foods Kitchen supplies

Warehouse? Yes No

Circle the categories delivered to warehouse and indicate frequency Milk Daily Weekly Bread Daily Weekly Fresh Produce Daily Weekly Dry Groceries Daily Weekly Monthly Annually Frozen Foods Daily Weekly Monthly Annually Kitchen Supplies Daily Weekly Monthly Annually

194 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE SCHOOL DISTRICT PURCHASING PROFILE

Request for prices

Screening products for approval Attach a copy of the school district screening procedure. See Appendix 15 for a sample procedure.

Sales calls policy Samples accepted on initial sales call: Yes No Appointment necessary: Yes No Preferred day and time for sales call: (Be prepared to provide a copy of the label of the product and a nutritional analysis at the first sales call.)

Special requirements

CN label required on meat/meat alternates and juice drinks? Yes No Refrigerated trucks required for delivery of fresh produce? Yes No List other special requirements of school district:

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APPENDIX 3

Market area analysis worksheet

Classify potential distributors as broadline or specialty. Check with nearby schools or districts to locate potential additional vendors. 1. Broadline vendors

2. Specialty Vendors

3. Review specialty vendors history of sales to the school district

4. Determine the potential dollar value of the products on which broadline and specialty vendors might offer a price. $ . 197 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE APPENDIX 3

5. Determine which vendors have common product lines.

6. Determine the dollar volume estimate for vendors with common product lines

7. Determine the dollars left unclassified b. Record the total potential dollar value from #4 above $ c. Subtract the potential dollar value for specialty distributors $ d. Potential remaining on which only broadline distributors can offer price $

8. Determine a third of the total dollar value of all products: #4 above divided by 3 $

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Self assessment of warehouse cost

When other departments share a warehouse, some cost is pro-rated. Square footage of space occupied by each department is one way to pro-rate cost. Count only the storage space each department takes. Assume all departments use equally the common areas, such as receiving, office space, and other general use space. Determine the space food service uses as a percentage of total space. Apply this percentage against any cost category such as pest control and utilities. Other departments probably won’t share some cost such as refrigerators and freezers; therefore, include 100% of those costs.

Example: 10,000 square foot warehouse and food service occupies 5,000 square feet. 10,000 divided by 5,000 = .50 or 50% Annual utility cost for the warehouse is $950 $950 x .50 = $475 - food service share of utility cost

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other number

200 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE SELF ASSESSMENT OF WAREHOUSE

Summary of warehouse cost

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Self assessment of warehouse delivery volume

The second step in determining the cost of operating a warehouse: Convert the total cost to a per case cost. Use a per case cost to determine if you can save enough on the purchase price of an item to cover the cost of warehouse operations. Determine the total cases of product delivered to or from the warehouse during the year. This assumes that you are not building inventory but maintaining it at a pre-established level; therefore, the number delivered to will be about equal to the number delivered from the warehouse. Use the number that is the easiest to find from your inventory records. If you are building inventory you should use the number of cases shipped from the warehouse. This calculation is called warehouse “throughput.” Total cases: Purchased food Donated Foods Paper and Supply items Other Total cases received/delivered

Don’t get too detailed with this calculation. Questions such as, “do I count one mop as a case?” make the calculation more difficult than necessary. The normal delivery unit is the best guide. All you want is a realistic estimate of throughput. Divide the total cases received/delivered (throughput) by the total cost from the summary above. Formula: $ (warehouse cost) divided by (throughput) = $ per case cost of warehouse operation.

Example: $258,756 : 164,652 = $1.57 When you know the per case cost, compare product cost to determine if warehousing will become part of your product movement policy. When making product comparisons avoid the tendency to “cherry pick” the items which you compare. A true comparison must deal with 100 percent of the items. If you compare only the high volume items, you might find that there is a cost savings; however, often the price paid for low volume items will offset any savings on high volume items. If you are currently operating a warehouse, take the current cost of items plus the cost per case for warehousing and compare it to the price paid by a similar school district with direct-to-site delivery.

202 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE SELF ASSESSMENT OF WAREHOUSE

Example: Your district Applesauce 6/# 10 invoice cost = . . . . $20

Warehouse cost = ...... $1.57

Actual food cost ...... $21.57

Comparison district - Applesauce 6/# 10= ...... $20.98

Cost savings with site delivery = ...... $.59 per case

Probably you will see a trend early in the comparison and you won’t need to complete comparison of 100 percent of the items. Be certain before you stop the comparison that you have compared low and high volume, frozen, dry and refrigerated items. Compare some items in all product categories before you reach a conclusion. If you are in a state with commercial distributors delivering donated food, the cost per case paid for direct-to-site delivery is also a good comparison. Except for the cost of financing the inventory, a distributor’s cost for donated or purchased food is about the same. If the school district cost per case for warehouse operation is more than the donated food delivery fee, then you have an indication that directto- site delivery may save money. The professional distributor should be more efficient than the school district. Remember that a foodservice distributor devotes 100 percent of his time to product movement, which is only one of hundreds of tasks you must accomplish in school foodservice. If you are in a district without a warehouse and are considering the capital investment to create a school district operated warehouse, then you can make the reverse comparison presented above. Compare the purchase cost of an item in your district to a similar sized district that operates a warehouse, adding the cost of operating a warehouse to the purchase cost the other district pays.

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APPENDIX 5

Par Stocks

Stock Stock Date Product # Level

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APPENDIX 6

Order Calendar

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APPENDIX 7

Procurement plan

This procurement plan is presented 4. Mail descriptions, instructions, as an example. It is not to be considered and response documents to all a model, nor does it represent all of the potential bidders. procurement options available to a 5. Open and tabulate responses in school food authority. This example a public meeting. represents the procedures of a single 6. Submit staff recommendation to school food authority. the school board for award of The Pretend School District will contract. purchase food and other items for use in the Child Nutrition Program in B. If the purchases are not covered by compliance with Federal regulations in section A of this plan, these Code of Federal Regulations Volume 7 purchases shall be made by use of state and local laws and regulations, the applicable state or local using the procedures outlined on this procedures. Small purchase and attached pages and the Chart of procedure is as follows: Procedures. 1. Develop descriptions for all A. If the total amount of purchases items. exceeds small purchase threshold 2. Develop instructions for will use formal procedures. Formal providing service or product. procedures can be Invitation for 3. Obtain price quotes from a Sealed Bid (IFB) or, Request for minimum of three suppliers. Proposal(RFP). Formal procedures 4. Prepare a price quote will be as follows: documentation sheet, and 1. Develop descriptions for all indicate the supplier who was items. awarded the quote and the 2. Develop instructions for length of time the price is set. providing service or product. 5. Submit documentation sheet for 3. Advertise in a newspaper of approval to assistant general circulation. superintendent for business.

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C. If it is necessary to make an brand, if appropriate, and the emergency purchase to continue number of cases. Accounting uninterrupted service, the will check the price on the purchase shall be made using invoice against the order price. noncompetitive negotiation to 5. The food service director will establish contract terms and price. develop and interpret A log of all such purchases shall specifications/descriptions. be maintained and reviewed 6. The food service director will monthly by the assistant approve brand or quality superintendent for business. The substitutions prior to delivery. log of emergency purchases shall 7. The purchasing office shall show: issue request for prices. The 1. Item name purchasing office shall receive 2. Dollar amount response to request for price. 3. Vendor 8. The Child Nutrition office shall 4. Reason for emergency evaluate response to request for D. All purchases will be conducted prices. as follows: E. All purchases will be conducted 1. The site manager will using the procedures on pages requisition food, supplies, and 1—3 and the attached Chart of equipment for site use. Procedures. Requisition does not mean a F. All records shall be maintained for form the requisition could be a period of three years plus the electronic, a preprinted form, a current year: standing order, or any method G. Code of Conduct that leads to an efficient The following conduct is ordering system. expected of all persons who are 2. The food service clerk will engaged in the award and place orders based on prices administration of contracts that are established through an supported by School Food and approved purchase method. Nutrition Program funds. No employee, officer or agent of 3. The site manager or a food the Pretend School District shall service assistant who has participate in selection or in the received appropriate receiving award or administration of a training will receive products. contract supported by program 4. The site receiver is only funds if a conflict of interest, real responsible for checking the or apparent, would be involved.

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Conflicts of interest arise when a value from contractors, potential school district employee: contractors, or parties to sub- has a financial or other interest in agreements. the firm selected for the award; The purchase during the school day of any food or service from a contractor is an employee, officer, or agent of the firm selected for the award; for individual use is prohibited. The removal of any food, supplies, has a member of the immediate equipment or school property, such as family who is an employee, officer, official records, recipe books and the or agent of the firm selected for the award; like is prohibited. The outside sale of such items as has a financial interest in the firm used oil, empty cans and the like will selected for the award; be sold by contract between the Pretend is about to be employed by the School District and the outside agency. firm selected for the award; or Individual sales by any school person to has a member of the immediate an outside agency or other school family who is about to be person are prohibited. employed by the firm selected for Failure of any employee to abide by award. the above stated code could result in a fine, or suspension, or both, or To ensure objective contractor dismissal. Interpretation of the code will performance and eliminate unfair be given at any time by contacting the competitive advantage, however, a Superintendent at 689-285-3678. The person that develops or drafts Pretend School District will not be specifications, requirements, statements responsible for any other explanation or of work, invitations for bids, requests interpretation which anyone presumes for proposals, contract terms and to make on behalf of the Board of conditions or other documents for use Education. by the child nutrition program in conducting procurement shall be H. Resolution of controversies excluded from competing for such 1. Any actual or proposed supplier procurements. Such persons are who is aggrieved in connection ineligible for contract awards resulting with a proposed purchase may from such procurements regardless of protest to the CN hearing officer. the procurement method used. The Pretend School District 2. The CN hearing officer will be an employees, officers or agents shall independent contractor with neither solicit nor accept gratuities, training in law, judicial, or favors, or anything of material monetary administrative hearing processes.

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3. The protest shall be in writing. IFB/RFP is opened and awarded 4. The protest shall be delivered it may be viewed by any company within 10 days of the action which or individual who entered a is being aggrieved. response to the proposed intent to 5. A hearing will be scheduled within purchase. 15 days of receipt of protest. 3. After acceptance, procurement 6. The proposed purchase will be information is available to the delayed until the protest is general public except As noted resolved unless the delay will below. result in disruption of meal service • Any supplier providing to children. In the event it is information as a part of a determined that the purchase is proposal or offer shall stamp necessary, an emergency shall be each page which they consider declared by the assistant proprietary information, “not superintendent for business and for public release.” emergency purchase procedures • Should the school district will be followed until protest receive a request to release this resolution. marked information the 7. The decision of the hearing officer supplier shall be notified within shall be in writing and shall be 24 hours and given 10 working delivered to the aggrieved supplier days to obtain a court order to with proof of delivery required. stop release. 8. The aggrieved supplier shall be • In 10 working days the party notified that an appeal of the requesting the information shall hearing officer’s decision is be provided a copy of the court possible. The appeal request order or instructions on when should be written and addressed to review the information. to the school board. This plan adopted by the Board of Education of the Pretend School District I. Public access to procurement at the regularly scheduled meeting on information this the ninth of April in the year 2001. 1. Procurement information shall be a public record to the extent provided in the State open records law. 2. All bids/offers shall be taken under advisement. Between the time an

212 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE PROCUREMENT PLAN

Chart of Procedures

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APPENDIX 8

Foods with standards of identity

Current as of 2/15/2001 - Information taken from CFR online

Milk and cream Canned fruits 21CFR Part 131 21CFR Part 145 Acidified milk Applesauce Acidified sour cream Apricots Concentrated condensed milk Berries Cultured milk Cherries Dry cream Figs Dry whole milk Fruit cocktail Eggnog Seedless grapes Evaporated milk Grapefruit Half and Half Peaches Heavy cream Pineapple Light cream Pears Light yogurt Plums Milk Prunes Nonfat dry milk Nonfat yogurt Beverages Yogurt 21CFR Part 165 Sour cream Bottled Water Sweetened condensed milk Canned fruit juices 21CFR Part 146 Grapefruit juice Lemon juice Frozen concentrate for lemonade (3 types) Orange juice - canned and frozen (12 types) Prune juice Pineapple juice

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Fruit butters, jellies, pre- Canned vegetables serves, and related products 21CFR Part 155 21CFR Part 150 Corn Fruit butters: apple, apricot, grape, Field corn peach, pear, plum, prune, quince Green beans Fruit jelly: apple, apricot, blackberry, Wax beans black raspberry, boysenberry, Peas cherry, crabapple, cranberry, Dry peas Damson, Damson plum, dewberry, Tomatoes fig, gooseberry, grape, grapefruit, Tomato concentrates Greengage, Greengage plum, Catsup guava, loganberry, orange, peach, Mushrooms pineapple, plum, pomegranate, Certain other canned vegetables: prickly pear, quince, raspberry, red artichokes, asparagus, bean sprouts, raspberry, red currant, currant, shelled beans, lima beans, butter beans, strawberry, and youngberry. beets, beet greens, broccoli, Brussel sprouts, cabbage, carrots, cauliflower, Artificially sweetened fruit jelly: celery, collards, dandelion greens, kale, Fruit preserves and jams: blackberry, mustard greens, okra, onions, parsnips, black raspberry, blueberry, black eyed peas, field peas, green boysenberry, cherry, crabapple, sweet peppers, red sweet peppers, dewberry, elderberry, grape, pimentos, potatoes, rutabagas, salsify, grapefruit, huckleberry, loganberry, spinach, sweet potatoes, swiss chard, orange, pineapple, raspberry, red truffles, turnip greens, turnips. raspberry, rhubarb, strawberry, tangerine, tomato, yellow tomato, Canned juices youngberry. 21CFR Part156 Artificially sweetened fruit preserves Tomato and jams: Frozen cherry pie: 21CFR Part 152 Frozen vegetables 21CFR Part 158 Peas

216 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FOODS WITH STANDARDS OF IDENTITY

Fish and shellfish Food dressings and flavorings 21CFR Part 161 21CFR Part 169 Canned oysters, all sizes French dressing Canned pacific salmon Mayonnaise Canned shrimp Salad dressing Frozen raw breaded shrimp Vanilla extract and concentrate Frozen raw lightly breaded shrimp Vanilla flavoring and concentrate Canned tuna Vanilla powder (4 kinds)

Nutritive sweeteners and Eggs table syrups 21CFR Part 160 21CFR Part 168 Eggs Dextrose anhydrous Dried eggs Dextrose monohydrate Frozen eggs Glucose syrup Liquid eggs Dried glucose syrup Egg whites Lactose Dried egg whites Cane syrup Frozen egg whites Maple syrup Egg yolks Sorghum syrup Dried egg yolks Table syrup Frozen egg yolks Raw meat products 9CFR Part 319 Cacao products Chopped beef, ground beef 21CFR Part 163 Hamburger Cacao nibs Beef Patties Chocolate liquor Fabricated steak Breakfast cocoa Partially defatted beef fatty tissue Cocoa Partially defatted pork fatty tissue Low-fat cocoa Sweet chocolate Tree nut and peanut products Milk chocolate 21CFR Part 164 Buttermilk chocolate Peanut butter, mixed nuts, Skim milk chocolate shelled nuts Mixed dairy products chocolate Sweet cocoa and vegetable fat coating Sweet chocolate and vegetable fat coating Milk chocolate and vegetable fat coating

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Cheese and related products Cereal, flour, and related 21CFR Part 133 products Blue cheese 21CFR Part 137 Brick cheese Flour Cheddar cheese Enriched flour Low-sodium cheddar cheese Self rising flour Colby cheese Enriched self rising flour Colby cheese for manufacturing Whole wheat flour Low-sodium Colby cheese Cracked Wheat Cottage cheese White cornmeal Dry curd cottage cheese Enriched corn meals Cream cheese Self rising white corn meal Cream cheese with other foods Yellow corn meal Edam cheese Self rising yellow cornmeal Gouda cheese Farina Grated cheese Enriched rice Grated American cheese food Semolina Monterey cheese 15 other variations Mozzarella cheese Low moisture mozzarella cheese Macaroni and noodle Part-skin mozzarella products Pasteurized process cheese 21CFR Part 139 (American) Macaroni products Pasteurized process cheese food Enriched macaroni products Parmesan and Reggiano cheese Whole-wheat macaroni products Swiss cheese 7 other variations of macaroni 43 other varieties of cheese Noodle products Enriched noodle products Frozen Desserts 3 other variations of noodles 21CFR Part 135 Ice cream and frozen custard Bakery products Goat’s milk ice cream 21CFR Part 136 Mellorine Breads, rolls, and buns Sherbet Enriched bread, rolls & buns Water ices Raisin bread, rolls, and buns Milk bread, rolls, and buns Whole wheat, breads, rolls and buns

218 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FOODS WITH STANDARDS OF IDENTITY

Cooked meats Italian beef sausage, Kosher Italian 9 CFR Part 319.80 & 319.81 Beef sausage Barbecued meats Smoked pork sausage Roast beef parboiled and steam Frankfurter, frankfurter, hot-dog, roasted wiener, vienna, bologna, garlic bologna, knockwurst, and Cured meats, unsmoked and similar products smoked Cheesefurters and similar products 9CFR Part 319 Braunschweiger and liver sausage or Corned beef liverwurst Corned beef brisket Corned beef round and other corned Luncheon meat, loaves, jellied beef cuts products Cured beef tongue 9CFR Part 319 Cured pork products, including ham, Luncheon meat shoulders, picnics, butts, and Meat loaf loins Ham patties, chopped ham, pressed Meat specialities ham spiced ham, and similar 9 CFR Part 319 products Scrapple Country Ham, country style ham, Bockwurst dry cured ham, country pork shoulder, country style pork Canned, frozen, or shoulder, and dry cured pork dehydrated meat food shoulder product Bacon 9 CFR Part 319 Chili con carne Sausage: fresh, smoked, Chili con carne with beans cooked Hash 9CFR Part 319 Corned beef hash Sausage Meat stews Fresh pork sausage Tamales and tamales with sauce or Fresh beef sausage gravy Breakfast sausage Spaghetti with meatballs and sauce, Whole hog sausage spaghetti with meat and sauce, Italian sausage, Italian sausage with and similar products beef Spaghetti sauce with meat Italian sausage with beef and veal, Tripe with milk

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Beans with frankfurters in sauce, Poultry sauerkraut with wieners and 9 CFR Part 380 juice, and similar products Canned boned poultry Lima beans with ham in sauce, Baby or geriatric food beans with ham in sauce, Poultry dinners (frozen) and pies beans with bacon in sauce, Poultry rolls and similar products Burgers and patties* Chow mein vegetables with meat, A la Kiev* and chop suey vegetables with Steak or fillet* meat Baked or roasted* Pork with barbecue sauce and beef Barbecued* with barbecue sauce Barbecued prepared with moist Beef with gravy and gravy with beef heat* Meat Pies Breaded products *Kind of poultry must be specified Pizza on label 9 CFR Part 319 Pizza with meat Other poultry dishes and Pizza with sausage specialty items 9 CFR Part 380 Fats, oils, shortening Ravioli* 9 CFR Part 319 Soup* Margarine Chop suey with* Mixed fat shortening Chop Suey* Lard, leaf lard Chow mein without noodles* Rendered animal fat or mixture Tamales* thereof Noodles or dumplings with* Stew* Meat salads and spreads Fricassee of wings* 9 CFR Part 319 Noodles or dumplings* Deviled ham, deviled tongue, and With vegetables * similar products Gravy with sliced* Potted meat food product and Tetrazinni* deviled meat food product Chili with beans* Ham spread, tongue spread, and Creamed * similar products Cacciatore* Fricassee* A-la-king*

220 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FOODS WITH STANDARDS OF IDENTITY

Croquettes* Cut-up poultry Slice with gravy and dressing* Giblets Salad* Chili* Hash* Sliced with gravy* Minced barbecue* *Kind of poultry must be stated at the appropriate place in the name

Raw poultry products 9 CFR Part 380 Broiler or fryer Roaster or roasting chicken Hen, fowl, or baking or stewing Turkeys fryer roaster turkey young turkey yearling turkey mature turkey or old turkey Breasts Breast with ribs Wishbones (pulley bones) Drumsticks Thighs Legs (kind must be specified) Wings Backs Halves Quarters Breast quarter Breast quarter without wing Leg quarter Thigh with back portion Legs with pelvic bone Wing drummette Wing portion

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APPENDIX 9

Reading a Food Label

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APPENDIX 10

Classifying food products by brand approval type

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APPENDIX 11

Corporate/Cooperative Distributor Buying Groups

How can you be sure you’ll get what However, there is a reasonable you want when you purchase processed alternative for schools and other smaller fruits and vegetables? It pays to be volume purchasers. They can rely on specific in your product descriptions. the reputation of private labels, which Referring to quality standards is a good are based on the federal grade starting point. standards. Just as it has established grade Here’s how private labels work and standards for fresh produce, USDA has how they relate to the federal set quality standards for most processed standards: fruits and vegetables. Each standard (or The majority of distributors belong grade) for canned or frozen fruits or to a buying group or have support of a vegetables is based on flavor, odor, corporate purchasing department. Each color, uniformity of size, number of group has standards for its first, second, defects, texture, and other and third quality labels. Products sold characteristics specific to the food. under each label are color- coded or USDA does not require processors to have unique logos. School food service have their fruit and vegetable products purchasers who know these codes can graded. Grading and inspections are order the quality desired. Distributors provided by USDA as a service for which will provide a chart showing their labels the buyer pays a fee. USDA inspectors for various products and grades. can grade products on the production The first, second, and third quality line or by lots after processing. In return labels are based on federal grade for the fee, the purchaser receives a standards. USDA has taken the grade certificate an assurance that the leadership role in developing these product received is the grade requested. standards in cooperation with private Grading is justified only when industry. The chart below shows the purchasing in very large quantities, federal grade standard standards and which schools rarely do. the private label equivalent:

Grade standards for fruits U. S. Grade A or U. S. Fancy = First quality private label *The majority of U. S. Grade B or U. S. Choice* = Second quality private label private label groups U.S. Grade C or U. S. Standard = Third quality private label pack “choice” grade of peaches, pears, and Grade Standards for vegetables fruit cocktail under the U.S. Grade A or U. S. Fancy = First quality private label first quality label. U. S. Grade B or U. S. Extra Standard = Second quality private label U.S. Grade C or U. S. Standard = Third quality private label 227 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE APPENDIX 11

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Note: This is a comprehensive list, contact Pocahontas Foods USA information is provided in support of the chart http://www.pocahontasfoods.com on pages 228 and 229. Anne D. Barker-Smith, Director Quality Assurance Foresight Partners, LLC P. O. Box 9729 Gayle Nay, Brands Manager Richmond, VA 23228 209 Main Street Phone: 804-262-8614 Boise, Idaho 83702 [email protected] Phone: 208-336-7003 FAX: 208-338-7180 Sysco Corporation http://www.sysco.com Frosty Acres, F.A.B., Inc. Ginger Kovar, Sysco Brand http://www.frostyacres.com Marketing Specialist Tricia Barber, Director, QA 1390 Enclave Parkway P.O. Box 1849 Houston, Texas 77077-2027 Alpharetta, GA 30023 Phone: 281-584-4179 Phone: 678-356-5400 FAX: 281-584-4070 FAX: 678-356-0100 [email protected] [email protected] UniPro Foodservice, Inc. Golbon Thomas A. R. Smouse, Director Product Randy Taylor, Executive VP Quality & Packaging Development 877 West Main Street, Suite 750 2500 Cumberland Parkway Boise, Idaho 83702 Atlanta, Georgia 30339 Phone: 208-342-7771 Phone: 770-952-0871 FAX: 208-336-9212 FAX: 770-955-3821 [email protected] Gordon Foodservice (no response received) U.S. Foodservice http://www.USFOOD.com Plee-zing/Lil Brave Bona Walker W. L. Stickney III, Chairman, 9755 Patuxent Woods Drive 1640 Pleasant Road Columbia, MD 21046 Glenview, IL 60025-1847 Phone: 410-309-7705 Phone: 847-998-0200 [email protected] FAX: 847-998-8059

Premier Foodservice Distributors of America Karen Haslebacher, Senior Technologist 4226 Coronado Avenue Stockton, CA 95204 Phone: 209-948-8122 FAX: 209-461-7469

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Sample letter for scheduling a pre-bid conference

Dear :

It was a pleasure to discuss with you the food and supply bid for the school district that will be issued in (date and time) for the period (effective dates). As we discussed, we are changing to prior approval of brands to avoid confusion when bids are opened. Your conference is scheduled for (insert date, time, and location). We appreciate your making available (insert name of person or persons expected) for this conference. Your company will benefit from representation by the person who has the most knowledge of your product line. Enclosed is a list of those items that will be included in the bid. Items approved as Distributor’s Choice are marked and will not be discussed at the conference. The purpose of the conference is to determine what brands your company will offer for prior approval on the remaining items. Your representatives should come to the conference prepared to provide the names of brand or brands you want us to consider. Also attached is a copy of the school district’s product screening policy. We will allow 10 days from the date of the meeting for you to provide copies of brand labels and nutritional analysis. Please advise your staff that samples are not accepted at the pre-bid conference. We look forward to developing a request for bids that places everyone in a winning position. If you have questions please contact me at (insert phone number).

Sincerely,

Susie Q. Smith, Foodservice Director

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APPENDIX 13

Pre-bid conference record

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APPENDIX 14

Product comparison

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APPENDIX 15

Sample protocol for screening new products or brands of existing products

Attachments g. The first five ingredients on the A four-part process to screen new label ingredient statement products h. Nutrient analysis showing total 1) Paper Screen calories, total fat, saturated fat, 2) Product Committee Screen carbohydrate, protein, sodium, and whether values from 3) Appearance Screen laboratory analysis or 4) Student Taste Screen calculated from standard database. A three-part process to screen new Get a copy of the product label brands of existing products and nutrient analysis from the 1) Paper Screen company. 2) Appearance Screen For a new product, create a new 3) Student Taste Screen product comparison sheet, list product as the first brand, and add Paper Screen the product to the agenda list for the next product committee Design a product comparison sheet meeting. with the following basic information: For an existing product list, add to the product comparison sheet and a. Brand of product determine if the product meets the b. Manufacturer’s code number description. c. Establishment number of the Notify manufacturer’s manufacturer if a meat product representative of results of the d. If applicable, the CN label paper screening. number and the meal pattern contribution Product Committee Screen e. Meal pattern contribution Appoint a product committee. f. Portion size and case size Possible members are the CN

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purchasing specialist, specialists Appearance Screen who have routine contact with the Appoint a committee of those schools, building level managers, involved in daily, hands-on food and the director of food service. preparation. Maintain an agenda of products Get a full-case sample from a for consideration at each regularly production line not a specially scheduled meeting. made sample. Obtain the sample Report appearance and taste from a stocking food service screen results to the committee. distributor. Get samples directly Allow any staff member to add from a manufacturer or broker if items to the agenda list. Member there is no other way to obtain who submits the item will present them. the following information to the Record the results of the committee: appearance screen in narrative a. How the product will be used form, signed by all present. b. Whether the product will Include the following: replace an existing item or will a. Compare the label to that expand the product list provided during the paper c. How product will impact cost screening. If the label is not d. Availability of the product from identical, suspend appearance other manufacturers and, if sole screening. source item, impact on cost b. Record the date/shift coding on e. Copy of product label and the packaging for the record if nutrient analysis product rejected. c. Screen the packaging for acceptability to your food Committee may take one of three service operation. Record the actions: style and condition of the 1) Refer for appearance testing packaging. 2) Reject as not appropriate for d. Evaluate the appearance of the food service system product in the raw and cooked 3) Table for future review with state for acceptability shape, additional information texture, color, smell, plate Report product committee coverage, and availability of screening to the appropriate sales recommended preparation personnel. equipment. e. Committee takes one of two actions: 238 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE SAMPLE PROTOCOL

1) Reject the product based Prepare a summary of the test on appearance results and report to the product 2) Refer the product for committee and the sales personnel student taste screen. representing the product. Retain the summary of all test results for Provide sales personnel with the documentation related to results of the appearance screen. expenditure of federal funds. See product tracking sheet.

Special considerations Student Taste Screen Do not allow sales personnel or Serve the product as part of a company representatives at the product regular meal service. Do not use a committee meeting, the appearance, or special group of students. taste testing. Test the product in three schools on the same day with the identical other foods. Rate food product as acceptable or unacceptable. Do not rate food products on a competitive basis. Place the rating scale by the cashier’s stand for the students to pick voluntarily. Encourage all students who choose the item being tested to complete a rating scale. Use a hedonic scale (smiley faces) for lower grades or the words acceptable/unacceptable with older students. Test only one product per day. Approve product with a simple majority of acceptable ratings unless school district administrators prefer a higher acceptance rating. If the product is unacceptable in two schools and acceptable in the third school, test the product again in two different schools.

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240 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE SAMPLE PROTOCOL

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Standard contract language

Every school district organizes its during normal working hours. Non requests for prices differently. The bidders may have access to the files variances in state laws and school only after the award has been made. No districts precludes the inclusion of bid files will be removed from the school documents in a manual of this type. All district offices and employees will not documents used to solicit prices should make copies nor will copy machines, be reviewed by the legal counsel of the facsimile machines or other such purchasing entity. The language below equipment be made available to the is designed to assist school districts in public for the purpose of copying bid developing their documents and should documents. Written notices of award be viewed as a check list with which will be mailed to all bidders. the school district can make sure their Advertising and promotion of documents address the subject. contract: The contractor shall not Addenda: If clarification of the advertise or publish information for specifications/instructions is required commercial benefit concerning this the request shall be made in writing not contract without the prior written later than seven working days prior to approval of the school district the time and date set for the bid purchasing officer. opening. The school district will Alternate offers: Alternate offers will respond to the request in the form of an not be considered unless specifically addendum issued to all potential requested in the specifications and bidders. No addenda will be issued instructions. within five working days of the date Application: It is understood and and time of bid opening. Should a agreed to by the vendor that this question arise which requires contract is entered into solely for the clarification during this time period the convenience and for any economical date and time of bid opening will be advantage offered to the school district. delayed to allow issuing an addendum. All purchases made by the school Access to pricing information: Price district shall be purchased from the files may be examined by bidders distributor receiving the award. School

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district employees or other When “Distributors Choice” is used in organizations shall not be allowed to the approved brand column the purchase under the terms of this distributor may offer a price on any contract. brand. The brand on which the price is Assignment and delegation: The offered must be stated in the bid contractor shall not assign any right nor documents and cannot be changed delegate any duty under this contract during the effective period without the without the prior written approval of permission of the school district. When the school district. “Private Label” is used in the approved Audit: At any time during the term brand column the appropriate quality of this contract, the contractor’s or any level of the private label included in the subcontractor’s books and records shall Corporate/Cooperative labeling chart in be subject to audit by the school this document shall be bid. The vendor district, state, or Federal government to only needs to circle the word private the extent that the books and records label and the school district can be relate to the performance of the assured that the brand bid is the same contractor or subcontractor. as the chart. Authority: This contract is issued Calendar days: Where the under the authority of the agent listed solicitation requires the offerer to state on the invitation to bid or the request a number of days, or to submit a for proposal. Changes to the contract milestone chart, the days used shall be including the addition of work or calendar days unless otherwise materials, the revision of payment specified. terms, or the submission of work or Cancellation: The contract may be materials, directed by an unauthorized canceled for cause by either party upon employee or made unilaterally by the issuance of written notice 30 days prior contractor are violations of the contract to the intended date of cancellation. and of applicable law. such changes, Cause for the school district to cancel including unauthorized written contract shall include, but is not limited to amendments, shall be void and without failure, on the part of the contractor, to effect, the contractor shall not be perform in compliance with the entitled to any claim under this contract specifications and/or contract based on those changes. conditions. Brand identification: This is a Compliance with applicable laws: qualified product specification. Bidders The materials and services supplied must bid on the specific name brand under this contract shall comply with items requested. Deviations from this all applicable Federal, state, and local requirement will not be considered. laws, and the contractor shall maintain

244 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STANDARD CONTRACT LANGUAGE all applicable licenses and permits. key employees) have been proposed for Contract: means the combination of debarment, debarred or suspended by a the solicitation, including the instructions Federal agency. It is the responsibility of to offerers, general terms and conditions, each bidder to sign the certification special terms and conditions, statement and submit it with any bid. It specifications and other product is the responsibility of each SFA to information, the offer and any best and require the certification as part of a final offers, and any amendments to the responsive bid. (Contact your state solicitation, or amendments to the agency for a copy of a sample form.) contract, the award documents, and any Decimals: The unit price offered terms implied by law. may contain four points (.0000) beyond Contract inception: An offer does the decimal. The extended price shall not constitute a contract nor does it be rounded to the nearest whole cent (5 confer any rights on the offerer to the or greater shall be rounded up and 4.9 award of a contract. A contract is not or less shall be rounded down). If the created until the offer is accepted in bid unit is less than a case the following writing by an authorized school district. methodology shall be utilized when Corrections: All prices and converting to invoice price. The bid unit notations must be in ink or typewritten. price shall be multiplied by the number No erasures are permitted. Errors may of units in a case and rounded to the be crossed out and corrections printed nearest whole cent. in ink or typewritten adjacent to the Delivery of price request: Offers crossed out error. Any correction shall received after the time and date stated be initialed in ink by the person making on the invitation to bid will be returned, the correction. All initials will be unopened to the appropriate bidder. explained in the margin or some other Post marks or dating of documents will visible and appropriate place on the be given no consideration in the case of same page as the correction. The late bids. If, however, a deliverer, UPS, explanation need only be the full name Federal Express, US Air, etc. can provide of the person having initialed the documented proof as evidenced by the correction and shall be printed in ink or signature of a school district employee typewritten. See word processor for an that substantiates the claim the bid was option. delivered to the proper place prior to Debarment Certification Statement: the time and date set for bid opening Each SFA must require that each and, through fault of school district responsive bidder include a certification personnel, the bid did not get to the statement, the bidder certifies that proper authority, the bid will be neither it nor any of its principals (e.g. considered.

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Delivery of price request: Offers parties. (Insert appropriate statement delivered in Federal Express, UPS, or related to pricing.)Note: automatic any other such deliverer’s envelope extensions are prohibited, both parties shall be sealed in a separate envelope must execute contract extensions in inside the deliverer’s packaging. Failure writing. to do this may cause the bid to be Facsimile or telegraphic offers: An inadvertently opened and thus rejected. offer shall be submitted on the forms Drained weights: Drained weight of provided. A facsimile, telegraphic, or “wet pack” items shall conform to good mailgram offer shall be rejected. industry practices and the minimum Fill of container: All products shall requirements of the Federal Food, Drug be filled as full as practical under good and Cosmetics Act. The individual commercial packing practices without products shall conform to drained impairment of quality and in accord weights as prescribed in the individual with the Federal Food, Drug , and specifications of each product in 21 Cosmetic Act regulations regarding CFR. Except for whole tomatoes drained individual specifications for standards weight is not a factor in USDA grades. of fill (21 CFR). Duty to examine: It is the Force majeure: Except for payments responsibility of each offerer to examine of sums due, neither party shall be the entire solicitation, seek clarification liable to the other nor deemed in in writing, and check its offer for default under this contract if and to the accuracy before submitting the offer. extent that such party’s performance of Lack of care in preparing an offer shall this contract is prevented by reason of not be a grounds for withdrawing the Force Majeure. The term “Force offer after the offer due date and time Majeure” means an occurrence that is nor shall it give rise to any contract beyond the control of the party affected claim. and occurs without its fault or Exceptions to terms and negligence. Without limiting the conditions: An offer that takes forgoing, Force Majeure includes acts of exception to a material requirement of God; fire; flood; or other similar any part of the solicitation, including a occurrences beyond the control of the material term and condition, shall be contractor or the school district. rejected. Gifts and gratuities: Acceptance of Extension of contract: any contract gifts from contractors and the offering resulting from this solicitation may be of gifts by contractors is prohibited. No extended for a period not to exceed employee of the school district (insert number of years,) years in total, purchasing products under provisions of upon the mutual agreement of both the contract issued as a result of this

246 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STANDARD CONTRACT LANGUAGE invitation shall accept, solicit, or award will be made unless all required receive, either directly or indirectly, information is received by the school from any person, firm or corporation district. any gift or gratuity. Inspection and testing: The Indemnification: The contractor contractor agrees to permit access to its shall defend, indemnify and hold facilities at reasonable times for harmless the school district from any inspection of the materials covered claim, demand, suit, liability, judgment under this contract, and the contractor’s and expense (including attorney’s fees facilities. The school district shall also and other costs of litigation) arising out have the right to test at its own cost the of or relating to injury, disease or death materials supplied under this contract. of persons or damage to or loss of Net container quantity: The property resulting from or in connection minimum net quantity of all products in with the negligent performance of this cans and jars shall be in accord with contract by the contractor, its agents, the Federal Food, Drug and Cosmetic employees, and subcontractors or any Act. The individual specifications for one for whom the contractor is standard of fill for the products as responsible. The contractor’ liability prescribed in 21 CFR shall be applied. shall not be limited by any provisions or Non-appropriation: This contract limits of insurance set forth in this will span more than one appropriation contract. The obligations, indemnities period, therefore, a non- appropriation and liabilities assumed by the clause shall be in effect. This clause contractor under this paragraph shall provides that should a contract be not extend to any liability caused by the canceled for reasons of non-availability negligence of the school district or its of funds, cancellation would take effect employees. on the last day of the appropriation Informalities: An informality shall period for which funding was available. be defined as a requirement of the The date would be (insert the last day specifications that is needed for of the fiscal year of the school district) informational purposes only and failure of any year during which the contract is on the part of a bidder to provide it in effect. In the event of cancellation for would have no impact on the outcome non- availability of funds the school of the bid. In such cases, the bidder district will not be obligated to purchase failing to supply the information may be any items remaining in inventory. It given a specified period of time to should be noted that vendors will be comply. If the bidder fails to comply in notified well in advance of a pending that time period, the bid will be rejected cancellation. for reasons of non-compliance. No

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Noncollusion: By signing the offer 6) Documents referenced in the and acceptance form or other official solicitation. Note: If the school contract form, the offerer certifies that district has different sections in the this price is offered without prior bid documents the names should understanding, agreement or connection be substituted in the list above. with any corporation, firm or person submitting a price for the same Pre-bid conference: If a pre-bid products. The offeror certifies that they conference has been scheduled under understand that collusive bidding is a this solicitation, the date, time and violation of Federal/state law and can location of it appear on the solicitation’s result in fines, prison sentences and cover sheet or elsewhere in the IFB or civil damage awards. RFP. An offerer should raise any Offer: means bid or proposal unless questions it may have about the otherwise specified. solicitation or the procurement at that Offerer: means a vendor who time. An offerer may not rely on any responds to any type of solicitation. verbal responses to questions at the Offer acceptance period: Bid conference. Material issues raised at the proposals are an irrevocable offer for 45 conference that result in changes to the days after the bid opening time and solicitation shall be answered solely date. through a solicitation addendum. Original signature: The Invitation to Product protection guarantees: bid form must be submitted with the School districts have “automatic” offer and must include an original product protection recourse against signature by an individual authorized to suppliers for product safety. According sign the offer. Failure to submit an to Federal regulations, the supplier original signature with the offer whose name and address appear on the signifying an unequivocal intent to be package is the responsible party. bound by it and the terms of the Contractors are expected to take solicitation shall result in rejection of immediate action to correct any the offer. situation in which product integrity is Order of precedence: In the event of violated. a conflict in the provisions of this Proprietary information: solicitation, the following shall prevail (Particularly applicable to purchase in the order set forth below: systems that require a vendor to include 3) Special terms and conditions; the cost paid for a product and where 4) General terms and conditions; promotional allowances are offered) If a bidder submits any document with the 5) Specifications or scopes of work or bid that is considered to be proprietary services;

248 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STANDARD CONTRACT LANGUAGE in nature or is considered to be a trade A protest shall include: secret, the bidder shall notify the school The name, address, and telephone district that the documents are included number of the protestor; in the bid. The school district will The signature of the protestor or honor the request unless or until a an authorized representative of the competing bidder asks to have access to protestor; the information. In such case, the Identification of the purchasing school district will notify the affected agency and the solicitation or bidder that a challenge has been made. contract number; If the affected bidder can produce a A detailed statement of the legal court issued restraining order within ten and factual grounds of the protest calendar days subsequent to the including copies of relevant notification, the information will remain documents: confidential and shall not be released The form of relief requested. pending subsequent court action. If the restraining order is not received within Quantities: The quantities indicated the ten working day period, the on the product list are based on information will be released and the previous years purchases and are school district shall not be held liable. accurate to the best of our ability. Protests: A protest shall comply with However, offerors must understand that and be resolved according to (Insert the the fact that a quantity is stated on an appropriate state or local code or item does not constitute a guarantee to administrative procedures. Not all states purchase any amount in excess of or purchasing agencies have a protest requirements. rule, this should be modified if no such Record retention: The successful law or rule exist for your use.) All vendor agrees to retain all books, protest shall be in writing and shall be records and other documents relative to delivered to the address of the this agreement for three years after final individual listed in the “if you have payment. The district its authorized questions” on the Invitation to bid. A agents and/or Federal/state protest of a solicitation shall be received representatives shall have full access to, by the named individual before the offer and the right to examine any of said due date. A protest of a proposed award materials during said period. If an or of an award shall be filed within ten investigation or audit is in progress, days after the protestor knows or should records shall be maintained until stated have known the basis of the protest. matter is closed.

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Release from contract: In the event Severability: The provisions of this the market for a product covered by this contract are severable. Any term or request escalates to a point that the condition deemed illegal or invalid shall vendor is delivering product at less than not affect any other term or condition cost, the vendor may petition for release of the contract. from the contract. The petition shall be Standards of identity: All products supported by a third party market must conform to U.S. minimum bulletin. The decision to release the standards of identity as authorized by vendor from the contract will be based the Food, Drug and Cosmetic Act and on the difference between the market at the supporting regulations in 21 CFR. the time of the bid opening and the Failure to comply places the contractor current market for this item. in violation of the contract with the Rejection of bids: The ABC School school district as well as Federal law. District, at its discretion, may reject any Solicitation: means an invitation for and/or all bids. bids (“IFB”) or a request for proposal Service Level: The contractor shall (“RFP”). fill all original orders at a monthly Subcontracts: The contractor shall average of 98% or above on the not enter into any subcontract under scheduled delivery day. The remaining this contract without the advance 2% shall be delivered within 24 hours written approval of the school district of the scheduled delivery day unless the purchasing officer. The subcontract school district agrees that the product shall by reference incorporate the terms will be reordered. and conditions of this contract. Substitutions: If a contractor is : The tax laws vary so much temporarily out of stock of a particular by state that it is impossible to include item, an equal or superior product at an sample language on this subject. Each equal or lower price may be delivered, school district should include language with prior approval of the school related to taxes that are or are not to be district. If a contractor is unable to included in the price offered. deliver a product or an approved Unit price prevails: Where substitute product, the school district applicable, in the case of discrepancy shall, in good faith and in it’s sole between the unit price or rate and the discretion, purchase a product of equal extension of that unit price or rate, the or greater quality from another source. unit price or rate shall govern. The contractor shall pay the difference Units of purchase: Whenever in the amount paid for the substituted wholesale units of purchase are product and the amount of the standardized, i.e., 6/#10, the bid unit is contracted price. specified as case, box, etc. If case , bag

250 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE STANDARD CONTRACT LANGUAGE or box is the bid unit, then the can be provided on 3.5” disk or as an description will specify the exact pack. attachment to an online E-mail. The When a potential contractor wishes to school district will not accept quote a pack size which is different responsibility for conversion of the file from the unit specified in the product to another platform or to an ASCII file. description, a different size may be Should there be a conflict between the quoted, but the total quantity must be word processed and the printed copy adjusted. issued the printed copy shall be The potential contractor shall always considered correct. mark out the pack specified and insert the pack being bid. The adjustment shall be made in the total quantity. A change in the bid unit or cost per unit is not acceptable. On items where the bid unit is specified in other terms, a space will be provided for potential contractor to enter the pack of the item being quoted. The potential contractor must complete this space when provided. If the pack size is followed by the word “only” the potential contractor must bid on the pack specified. Waiver and rejection rights: Not withstanding any other provisions of the solicitation, the school district reserves the right to : Waive any immaterial defect or informality; Reject any and all offers or portions thereof; or Cancel a solicitation.

Word processing disk: The documents for this bid were generated using (insert word processing software name and version). For the convenience of potential bidders a copy of the file

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APPENDIX 17

Active school purchasing cooperatives

This list was developed from a posting to Mealtalk and should not be considered a complete listing of all child nutrition purchasing cooperatives.

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254 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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256 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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258 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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260 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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262 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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264 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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266 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE ACTIVE SCHOOL PURCHASING COOPERATIVES

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268 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE APPENDIX 18

Nutrition Label

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APPENDIX 19

Critical Path Form

Task Deadline date

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APPENDIX 20

Manufacturers’ instructions evaluation form

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APPENDIX 21

Internet Resources

The internet resources were correct as of 03/03/2001. Due to the frequency of updates of web pages, the exact location may be different.

Child Nutrition Purchasing Regulation - http://www.nara.gov Select: The Federal Register Select: Online CFR Select: Title 7 Select: 3000

Commodity Specifications - http://www.ams.usda.gov/ or http://www.fsa.usda.gov/ Select: Food Purchases Select: Product Descriptions Select: The category of food you are seeking

Federal Government publications - http://www.gpo.gov/ Select: Agency name (as an example ams.usda or fsis.usda) Select: At this point you may access a catalog or an order form, or A list of government bookstores.

Food Safety - http://www.foodsafety.gov Select: News and Safety Alerts

Grade Standards for Fruits and Vegetables - http://www.ams.usda.gov/ Select: Fruit and Vegetable Select: Processed Products Select: U. S. Grade Standards Select: Category ( fruits etc.) Select: Specific name of food

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HACCP - http://www.fda.gov or http://www.fsis.usda.gov/ Select: Under Hot Topics - Food Select: Food safety virtual university Select: Program Areas Select: Consumer education Select: HACCP Select: Topic of choice or links

Inspection Offices Processed Fruit and Vegetables - http://www.ams.usda.gov/ Select: Under Programs - Fruit and Vegetable Select: Processed Products Standards and Quality Certification Select: Inspection Offices

Market News Reports - http://www.ams.usda.gov/ Select: Market News Example 1 Select: National Weekly Pricing Report ( ASFSA/ACDA report) Select: date, see report Example 2 Select: Fruit and Vegetable and Speciality Crops Report Select: Individual Daily Reports Select: U.S. Terminal Market Price Reports Select: Fruit, or Vegetable, or Onion & Potato Select: Terminal market city of choice See report Example 3 Select: Poultry and Eggs Select: Daily Commodity Report Select: The category researching (Eggs, Poultry etc.) Select: City or regional market See report

Milk Market Orders - http://www.ams.usda.gov/dairy/orders/htm Select: Map ( to determine your region) Go back to main dairy page Select: Milk market administrator web pages Select: Your region (1) Current Class Prices for your F. O. #

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(To determine current class prices) (2) Advance Class Prices for your F. O. # (To determine estimated class price for next month)

Nutrient Data Base for Standard Reference - http://www.nal.usda.gov/fnic/foodcomp/ Select: Search the Database Type: keyword for food you are seeking Scroll Down List: select type of food Select: weight or portion size Select: Report, see report Scroll Down: view nutrients Select: new search for next food

National Institute of Governmental Purchasing, Inc. - http://www.nigp.org Select: Join NIGP or Contact us

Standards of Identity - http://www.nara.gov/ Select: Federal Register Select: Online CFR Select: Title 21 (FDA),and Title 9 (USDA) Select: 100 - 169 (FDA), and 319 & 380 (USDA)

Thermometers - http://www.fsis.usda.gov Select: Consumer Education and Information Select: Thermy(TM) Select: Kitchen Thermometers

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APPENDIX 22

Warehouse Receiving Temperature Form

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APPENDIX 23

Warehouse Receiving Report

281

APPENDIX 24

Supplier audit survey

Type of Supplies:

Name: Address: Phone: Fax: E-mail:

1) Where is the plant located that produces the product? 2) What other types of products are produced at this facility? 3) What food safety system does the facility use and is it based on the principles of HACCP? 4) Does the company operate under an ISO9000 quality system and is it certified? 5) What type of analytic testing does the company do on a regular basis? Microbiology, chemical and physical? Does the company do its own testing or use outside laboratories? 6) Are the on-site and contract laboratories accredited to an independent laboratory standard? 7) Does the production facility have a pest control contract? What types of pest control procedures are in place? 8) Does the facility have its own sanitation crew or use an outside contract company for sanitation? 9) Are there specifications for raw and finished products? 10) Are there written operating procedures for all production? 11) Are there written personal hygiene standards? 12) What type of training is provided for employees with respect to food handling, sanitation, and good manufacturing procedures? 13) What regulatory requirements and agencies are applicable to this facility’s operations? How often are food inspections conducted at this facility?

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FIRST CHOICE

REFERENCES

Allaben, Beth, Office of the General Counsel, USDA, internal memo to staff USDA/FCS/FDD, May 5, 2000. Civin, Robert, “Sheltered Income, The Battle Continues,” Institutional Distribution, April 1993, Vol. 29, No. 4. Code of Federal Regulations, Procurement Regulations National School Lunch Program, Title 7 Part 210, 3015, 3016 and 3019, Retrieved 09/10/2001, from the World Wide Web http://www.nara.gov/. Code of Federal Regulations, Standards of Identity for food as authorized under the Food, Drug, and Cosmetic Act, Title 21 Part 100 - 169, Retrieved 12/22/2000, from the World Wide Web http://www.nara.gov/. Code of Federal Regulations, Standards of Identity for food as authorized under the Meat and Poultry Inspection Acts, Title 9 Part 319 and 380, Retrieved 2/12/2001, from the World Wide Web http://www.nara.gov/. Cooperative Purchasing for Child Nutrition Programs, Nutrition Satellite Network, National Food Service Management Institute, The University of Mississippi, 1999. Corwin, Steven H. CPPO, C.P.M., and McConnell, Margaret E., J.D. General Public Procurement, Herndon, VA: National Institute of Governmental Purchasing, Inc., 2000. Denny, Cleve B. Successfully Managing Product Recalls and Withdrawals, Washington, D. C.: National Food Processors Association Bulletin 34L, 1987. Deane, Shelia, Sales at Urner Barry Publications, E-Mail to author, February 2, 2001. “Distributor Buying/Marketing Groups,” ID: The Voice of Foodservice Distribution, November 1999, Vol. 35, No. 11. Duprey, Steven, Economist, Atlanta Milk Market, E-Mail to author, January 30, 2001 Eames, Donald and Norkus, Gregory X., “Developing Your Procurement Strategy,” Cornell H. R. A. Quarterly, May 1988, Vol. 29, No. 1. Federal Government Publications - Order Information, Retrieved 2/9/2001 from the World Wide Web http://www.gpo.gov/.

285 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST REFERENCES CHOICE Gunn, Marlene, “Cooking for the New Generation - Storing, Cooking, and Holding The New Generation Foods,” 1997 Breakfast Lunch Training Module, University. MS: National Food Service Management Institute, The University of Mississippi, 1997. Gunn, Marlene, “Procurement,” in Managing Child Nutrition Programs, Leadership for Excellence, edited by, Josephine Martin and Martha T. Conklin, Gaithersburg, MD: Aspen Publishers, Inc., 1999. “HACCP: A State of the Art Approach to Food Safety,” FDA Backgrounder, August 1999, Retrieved 12/28/00 from the World Wide Web http://vm.cfsan.fda.gov/~lrd/bghaccp.html. “HACCP Principles and Application Guidelines,” National Advisory Committee on Microbiological Criteria for Foods, USDA/FDA, August 1997, Retrieved 12/28/2000 from the World Wide Web http://vm.cfsan.fda.gov/~comm/nacmcfp.html. Handbook for Safe Food Service, National Assessment Institute, Englewood Cliffs, New Jersey: Regents/Prentice Hall, 1994. “Independents Emerge in Systems Arena; Broadliners Increase Market Share,” ID: The Voice of Foodservice Distribution, March 2000, Vol. 36, No. 3. ID: The Voice of Foodservice Distribution, Subscription information, Retrieved 12/27/2000, from the World Wide Web http://www.restaurantbiz.com/id/index.shtml. Kotschevar, Lendal H. ,Ph.D., and Richard Donnelly, Quantity Food Purchasing, 4th edition. New York: MacMillan Publishing Company, 1994. Logan, Jane. Executive Director, NFSMI, Memorandum to Participants, Procurement: The Basics and New Challenges, September 17, 2001. National Institute of Governmental Purchasing Web Page, Contact us and Join NIGP, Retrieved 12/27/2000, from the World Wide Web http://www.nigp.org. NFSMI Resource Guide 2001, University, MS: National Food Service Management Institute, The University of Mississippi, 2001. Perkins, Caroline, and Lavitt, Michelle. “Distributors Proactive on Margins,” ID: The Voice of Foodservice Distribution, January 1998, Vol. 4, No.1. Redden, Marlene, [email protected], E-mail to author February,12,2001. Robinson, Ann, Ph.D. “All Star Receiving for Child Nutrition,” 1998 Breakfast Lunch Training Module, University, MS: National Food Service Management Institute, The University of Mississippi, 1998.

286 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE REFERENCES FIRST CHOICE ServSafe® Essentials, Chicago, IL: The National Restaurant Association Education Foundation, 1999. School Food Purchase Study: Final Report, Executive Summary, Alexandria, Virginia: United States Department of Agriculture, Food and Nutrition Service, Office of Analysis and Evaluation, October 1998, Retrieved 5/17/2001 from the World Wide Web http://www.fns.usda.gov/oane/. Tanyeri, Dana. “Top 50 Maintains Double-Digit Gains,” ID: The Voice of Foodservice Distribution, March 2000, Vol. 36, No. 3. The Almanac of the Canning and Freezing Industry- Order information, Retrieved 2/20/2001, from the World Wide Web http://www.eejudge.org/, Westminister, MD: Edward E. Judges Company. The Antitrust Laws, a booklet, published by the Antitrust Division, Department of Justice. The 2000 Model Procurement Code for State and Local Governments, Chicago, IL: American Bar Association, July 2000. Thomas Publishing Company, order information for Thomas Food Industry Register Buying Guide, Retrieved 2/15/2001 from the World Wide Web http://www.tfir.com. USDA/AMS. Commodity Specifications, Chicken Nuggets and Chicken Patties, June 1999, Retrieved February 9,2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Federal Milk Market Orders, Milk Market Administrators Web Page for Pacific Northwest, and Western Region, Current Prices for Class I for January 2001, Retrieved 2/1/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Market News Reports, National Weekly Pricing Report for January 29, 2001, Retrieved 2/2/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Market News Reports, Fruit and Vegetable Market News, Seattle Fruit, February 2, 2001, Retrieved 2/2/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Market News Reports, Fruit and Vegetable Market News, Pittsburgh Terminal Prices, February 2, 2001, Retrieved 2/2/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Market News Report, Southeastern Farm Market Summary, Atlanta, Georgia, January 31, 2001, Retrieved 2/1/2001 from the World Wide Web http://www.ams.usda.gov/.

287 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST REFERENCES CHOICE USDA/AMS. Market News Report, Southern States Broiler/Fryer Parts, Jackson, MS, February 5, 2001,Retrieved 2/6/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Processed Products Branch Plant Surveys, Washington, DC: Government Printing Office, 2000. USDA/AMS. Processed Products Branch Plant Systems Audit (PSA) Program, Washington, DC: Government Printing Office, 2000. USDA/AMS. Processed Products Fruit and Vegetable Inspection Offices, Retrieved 3/16/2001 from the World Wide Web http://www.ams.usda.gov/. USDA/AMS. Qualified Through Verification (QTV) Program for the Fresh-Cut Produce Industry, First Edition, Washington, DC: Government Printing Office, 1999. USDA/FSA. Announcement of purchase of (insert grain, oil products by name), Retrieved 10/8/2001 from the World Wide Web http://www.fsa.gov/daco. USDA/FSIS. Food Recalls, Food Safety Focus, April 2000, Retrieved 12/28/2000 from the World Wide Web http://www.fsis.usda/OA/pubs/recallfocus.htm. USDA/FSIS. Inspection and Grading: What Are The Differences?, August 1998 - Contact information updated May 2000, Retrieved 09/10/2001 from the World Wide Web http://www.fsis.usda.gov/OA/pubs/ingrade.htm. USDA/FSIS. Irradiation of Raw Meat and Poultry - Questions and Answers, Retrieved 4/26/2001 from the World Wide Web http://www.fsis.usda.gov/OA/pubs/qa_irrad.htm. USDA/FSIS. Kitchen Thermometers, Technical Information, April 2000, Retrieved 12/28/00 from the World Wide Web http://www.fsis.usda.gov/oa/thermy/kitchen.htm. USDA/NAL. Nutrient Data Base for Standard Reference, Retrieved 3/6/2001, from the World Wide Web http://www.nal.usda.gov/fnic/foodcomp/. U.S. Department of Health and Human Services, Food Code, 1999. U.S. Department of Health and Human Services, Food and Drug Administration, Fish and Fishery Products Hazards and Controls Guide, Chapter 20 Metal Inclusion, January 1998, Retrieved 10/8/2001 from the World Wide Web http://www.fda.gov. U. S. Small . Antitrust for Small Business, January 1985. RFP 1997-98 Oregon Child Nutrition Coalition, Tigard, Oregon: Oregon Child Nutrition Coalition, 1997. Virts, William B., Hospitality Management Library - Purchasing, East Lansing, MI: Educational Institute of the American Hotel & Motel Association, 1987. 288 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST CHOICE GLOSSARY

Audit - a systematic review to determine product remains in inventory. if activities and practices follow set Effective period - the dates during requirements. which stated prices will be in effect. Bid/bid awards - a bid is a formal Extended price - the unit price for a request for prices; the bid award goes to product multiplied by the quantity. the vendor who offered the lowest and best price on a product or group of FIFO - First In First Out, a system of products. rotating stock where the oldest stock is used first. Bottom line award - contracting with a vendor based on lump sum price Food code - FDA’s model code designed quoted for all products in a group. to assist food control jurisdictions at all levels of government by providing a - frozen or chilled Break in cold chain scientifically sound technical and legal product warming above recommended basis for regulating the retail segment of or safe temperatures during handling the food industry. and delivery. Foodborne illness - a disease that is - a group of people or Cooperative carried or transmitted to people via organizations who join together to food. accomplish a task. In this manual a purchasing cooperative is formed by a GMP’s - Good Manufacturing Processes group of school districts to accomplish that are pre-requisite for a HACCP plan all or part of the steps in the purchasing to minimize the growth of task. microorganisms; examples: proper personal hygiene, proper cleaning and - statement of only those Definition sanitizing, and approved suppliers. measurable characteristics necessary to assure procurement of product desired. GNR- Gradeable Nest Runs, eggs from a production facility that have had some - a form of brand Distributor’s choice “checks,” “dirties,” and other obvious approval that indicates the school has undergrades removed and are suitable no preference as to the brand on which for grading. a price is offered. GL - Graded Loose, shell eggs that have - the dollar value of a single Drop size been washed, sized, and candled for delivery to a single site. quality and packed in trays, flats, or Dwell time - the length of time a non-carton containers.

289 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE FIRST GLOSSARY CHOICE HACCP plan - a written document that Pathogens - disease-causing delineates the formal procedures for microorganisms following the Hazard Analysis Critical PCO - Pest Control Operator Control Point principles developed by The National Advisory Committee on Pre-bid conference - a meeting with Microbiological Criteria for Foods. potential vendors prior to requesting prices on a list of products. Inventory - the value of food and supplies on hand, whether at the food Price quotes - vendor’s response to a preparation site or in acentral request for prices, stating the price at warehouse. which vendor will provide products. Inventory turns - the number of times in Private label - a form of brand approval a given time period when the dollar that limits products on which a vendor value of inventory is replaced. can bid to one of the labels of a distributor corporate/cooperative group. JIT - delivery of food and supplies just in time for food preparation usually Private sector - commercial, for-profit once per week or once every two foodservice business. weeks, based on the most cost effective Product/product item - a food, paper, or delivery size. cleaning supply used in the preparation Line item award - a purchase system and service of meals. that contracts for products based on the Product movement - the movement of price of each item. product from the distributor to school Low ball - a practice by vendors of sites or from the school warehouse to offering a price that is below cost with school sites. the intent to raise the price or substitute Public sector - Non-profit food service a lower-grade product after the bid is operations that get public funds for awarded. some of their expenses. Manufacturer’s brand - a form of brand Receiver - the person who meets the approval that indicates by brand and truck and checks a delivery for code number those products on which accuracy. the distributor can quote prices. Receiving process - the procedures that Market-based pricing - basing the cost determine how a delivery of products is of commodities on markets. checked for accuracy and processed for NARA - National Archives and Records payment. Administration, a Federal government Receiving report - a document that tells agency that storesrecords from all the receiver what should be included in agencies. a delivery, with price and the Par stocks - the level to which inventory brand/code number. is restored each time an order is placed.

290 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE GLOSSARY FIRST CHOICE Sheltered income - the hidden, incentive income the manufacturer pays the distributor for such things as stocking certain products or promotional allowances. Site delivery - delivery of food and supplies direct to the food preparation site. Specification - stipulating the complete and detailed definition of product requirements. Stock level - another term often used for par stock. Throughput - the amount of product delivered to and shipped from a warehouse in a specified period of time.Temperature danger zone - 41 to 140 °F, the temperatures at which microorganisms grow rapidly.

291 NATIONAL FOOD SERVICE MANAGEMENT INSTITUTE