2nd Edition FIRST CHOICE
A Purchasing Systems Manual for School Food Service
2nd Edition
Produced by the National Food Service Management Institute Through a Cooperative 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 trade names, commercial products or organizations 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 cooperatives ...... 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 procurement 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 financial management 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 business 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 accounting 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 organization 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