orientation to school nutrition management .....93 instructor’s manual osnm – procurement and...

Orientation to School Nutrition Management

Instructor’s Manual

Procurement and Inventory Management

Time: 4 hours

National Food Service Management Institute

The University of Mississippi

ET104-11

2011


OSNM – Procurement and Inventory Management 2

Table of Contents

Preparation Checklist .......................................................................................................................3

Instructor’s Background Information ..............................................................................................4

Functional Area and Competencies .................................................................................................5

Lesson Objectives ............................................................................................................................5

Lesson-at-a-Glance ..........................................................................................................................6

Lesson Plan ......................................................................................................................................8

Follow-up Suggestions...................................................................................................................89

Key Terms ......................................................................................................................................90

Supplemental Resources ................................................................................................................91

References ......................................................................................................................................92

Pretest/Posttest ...............................................................................................................................93



Preparation Checklist

Instructions: The following tasks are necessary for presenting this lesson. Assign each task to a specific person and determine the date that each task must be completed. Keep track of the progress by recording information on the tracking form and checking off tasks as they are completed.

Task Person

Responsible Completion

Date √

Reserve equipment and gather supplies as needed for use on the day of class (6 weeks prior). Instructor Manual Roster of participants attending for instructor Participants’ sign-in sheets Pretest and Posttest List of equipment and supplies needed Microphone (preferably wireless) Computer to present slides and DVD Projector and screen Wireless presenter device and laser pointer Flip chart paper (self-adhesive strip sheets) Painters’ tape (do not use masking tape) Markers (flip chart) Pen, pencils, note paper, highlighters, self-adhesive notes, page markers, index cards (each table) Name tags and table tents

Instructor

Participant’s Workbook Agenda, roster of presenters/participants, and handouts

Evaluation (lessons and/or overall for each participant)



Instructor’s Background Information

Note to Instructor: The purpose of the background information section is to help you become familiar with the context of the lesson. It is not a part of the lesson detail.

Procurement, or the purchasing function, supports the primary goal of the school nutrition

programs, which is “to protect the health and well-being of the nation’s children,” as stated in the

National School Lunch Act of 1946. Every purchasing decision made must be based on the

nutritional needs of children and support for the staff at the school site where food is prepared

and served. Procurement in school nutrition requires a multi-step process that occurs in a

dynamic environment that is always changing. According to food purchasing authority Marlene

Gunn, author of First Choice: A Purchasing Systems Manual for School Food Service,

“Procurement is not an exact science, and training is essential for successful decision-making

appropriate for the situation.” This lesson highlights the basics of procurement for school

nutrition. It takes many years of experience to become even a novice. This lesson is a starting

point.

Role of the School Nutrition Director The school nutrition director is charged with the responsibility of administration of the school

nutrition program within a school district. One of the responsibilities of the director is the

procurement of all items required to prepare and serve meals for students. The director must

understand the details of the procurement process in order to successfully establish procedures

which assure customers safe, nutritious, and quality meals at the best price possible and within

the requirements of local, state, and federal regulations. This lesson is an introduction to the

knowledge required to fulfill the duties and responsibilities of an aspiring school nutrition

director in terms of procurement. It will cover the very basics of procurement.



Functional Area and Competencies

Functional Area 8: Procurement and Inventory Management

Competency 8.1: Develops procurement guidelines that comply with established

regulations and support operational goals of the school nutrition program.

Competency 8.2: Establishes operational procedures to effectively manage receiving and

inventory systems.

Source: Competencies, Knowledge, and Skills for District-Level School Nutrition Professionals

in the 21st Century available on the NFSMI website:

http://nfsmi.org/ResourceOverview.aspx?ID=284

Lesson Objectives: At the end of this lesson, participants will be able to

1. Identify persons in the food distribution chain and know how to communicate with all

players in the chain.

2. Describe the role of ethics in procurement.

3. Identify federal, state, and local procurement regulations, policies, and procedures governing

all school nutrition program purchases.

4. Identify various types of acceptable purchasing systems.

5. Describe how to develop and use specifications, descriptions, and approved brands for

assembling a food bid.

6. Identify the basic types of pricing mechanisms.

7. Describe how to develop a critical path plan for procurement.

8. State the basics of receiving and inventory management.



Lesson-at-a-Glance Time Allowed Topic Activity Materials

10 minutes • Introduction to lesson

• Welcome • Pretest

Participant’s workbook Pretest

Objective 1: Identify persons in the food distribution chain and know how to communicate with all players in the chain 25 minutes • Food distribution

chain • Types of distributors

• Distribution chain flowchart

• Private label brands comparison chart

• School cooperative profile

Participant’s workbook

Objective 2: Describe the role of ethics in procurement 15 minutes • Ethical Behavior • Unethical behavior Participant’s workbook Objective 3: Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases 40 minutes • Procurement

guidelines • Federal regulations • Regulatory

environment

• Purchasing sense survey • Standard of Identify • Label • Identify federal agencies


Objective 4: Identify various types of acceptable purchasing systems 20 minutes • Four purchase

methods • Bid awards

• Identify section of a formal bid

• Line-item awards • Bottom-line categories

grouping


Objective 5: Describe how to develop and use specifications, descriptions, and approved brands for assembling a bid 45 minutes • Specification and

descriptions • Product

classification • Brand approval

• Item classification • Taste testing product • Brand approval

Participant’s workbook Taste testing items (frankfurters, paper plates, toothpicks, napkins, thermometer)



Objective 6: Identify the basic types of pricing mechanisms 25 minutes • Pricing mechanisms • Pricing mechanisms

• Firm price bid • Final cost + fee


Objective 7: Describe how to develop a critical path plan for procurement 15 minutes • Developing a critical

path • Critical path for

procurement Participant’s workbook

Objective 8: State the basics of receiving and inventory management 25 minutes • Receiving

• Storage • Inventory

• Receiving • Checklist for product

receiving • Storage guidelines • Standard stock


10 minutes • Follow-up suggestions

• Lesson evaluation

• Posttest • Administer evaluation

Posttest Evaluation form

240 minutes = 4 hours



Lesson Plan

Introduction

SHOW: Slide #1, Purchasing Orientation – First Choice


The University of Mississippi

Procurement and Inventory Management

SAY: Welcome to Procurement and Inventory Management, an orientation lesson for school

nutrition directors. Locate the Lesson-at-a-Glance near the front of your workbook for a planned

outline of the topics and activities we will cover in today’s lesson. Our time here will only

scratch the surface of procurement. It will take many years of experience, trials, errors, and

troubles to master this topic. (Briefly go over the lesson.)

SAY: Before we begin, let me tell you a little about myself.

Instructor’s Note: Give participants a brief introduction about your background and why you

are qualified to teach about procurement. You may want to have participants share their name,

school district and two interesting facts about themselves or two experiences they have had with

procurement.



Objective 1: Identify persons in the food distribution chain and know how to communicate with all players in the chain SHOW: Slide #2, Objective 1

Objective 1

Identify persons in the food distribution chain and know how to communicate with all players in the chain

SAY: Our first objective in the procurement lesson is to identify persons in the food distribution

chain and know how to communicate with all players in the chain. As a school nutrition

director, you will make decisions about the procurement of all food, supplies, and equipment

used to prepare and serve meals to customers in your school district. You will be expected to set

up an inventory management system that is compatible with the district’s procurement

procedures. It is a time-consuming endeavor.

ASK: How many of you are involved in bidding the food for your district? (Acknowledge the

number of participants who raise their hands.)

SAY: Procurement is a very complicated process and many of you may feel very frustrated with

the process. We hope we can provide you with information that will help in this short 4-hour

lesson. I strongly suggest that you sign up for the NFSMI purchasing course, First Choice, if

you have an opportunity. Check the NFSMI website for more information.

There are two levels of purchasing as it relates to management of school nutrition programs. The

school nutrition director can opt for the bottom level by simply placing food orders and hoping



for the best. Or, the director can elect to move to a higher level by purchasing goods and

services using a multi-step process which involves distinct phases of planning, writing

specifications, advertising the procurement, awarding a contract, and managing the contract.

SHOW: Slide 3, Food Distribution Chain

FOOD DISTRIBUTION CHAINfrom Grower to School

Growers

Manufacturers

Distributors

End users

Broker/sales rep

Distributor buying group

School/district purchasing co-op

UNIT 2 - Chapter 3 - 1

SAY: If the nutrition director expects to operate at the higher level, it is important to know who

is part of the food distribution chain and the demands of each other’s role. The food distribution

chain has become increasingly complex over the years. The situation has changed from a buyer's

to seller's market. Schools are no longer the dominant market segment and must learn to sell

themselves as customers. Communication failure is often the major source of controversy

between the vendor community and the schools.

To make wise decisions the person or persons in charge of purchasing for the school nutrition

program must understand the role of each player. If you look at the slide, you can see there are

basically four players who most often own the product.

ASK: Can someone tell me who they are? (Allow a volunteer to share the answers.)

FEEDBACK: Growers, Manufacturers, Distributors, and End Users



DO: (Workbook Activity) Food Distribution Chain from Grower to School

SAY: Look in your workbook for the flowchart that shows the place of the various players.

Below the chart, there is a list of food distribution players and their roles. Fill in the blank with

the name of the player that best fits the role described. Each player is listed on the flowchart.

The first blank is filled in for you. You may discuss your answers with your neighbors.

Instructor’s Note: The italicized words are blank in the Participant’s Workbook.

Food Distribution Chain from Grower to School

Buying Group

School/District Purchasing co-op

Growers

Manufacturers

Distributors

Government Agencies

End Users

Broker Sales Rep



• The grower is the individual or group that actually grows the product.

• The manufacturer is the firm that converts the raw product to a further processed state.

Packer is another term for manufacturer.

• The distributor is the company that purchases the product from the manufacturer and sells

and delivers to the customer.

• The buying group is made up of independent distributors who maintain a private label and

provide services such as product control to local distributors.

• Government agencies such as the Food and Drug Administration, USDA, and the

Environmental Protection Agency are regulatory agencies that protect the safety of the

food supply. Notice that the government agencies impact every player in the chain.

• The broker or sales representative is the person or firm employed to sell the

manufacturer’s product to the distributor. They may call on the school nutrition director

or business manager to discuss the product.

• The school/district purchasing co-op administrator is the chief officer for school districts

that form a purchasing cooperative group.

• The end user is the school district that purchases a product to serve to the student

customer.

Instructor’s Note: Check answers by reading the statement and then asking a participant (by

name) to provide the answer.



SAY: It is important to know who the customer is in each link in the food distribution chain and

how the various players in the chain make money.

SHOW: Slide 4, Types of distributors

Types of Distributors

• Full or broadline

• Specialty wholesalers

• Special breed distributors – restaurant chains

• Supermarket or wholesale clubs

SAY: In the activity we just completed, we defined the distributor as the company that

purchases the product from the manufacturer and sells to the customer. There are four basic

types of distributors that schools need to recognize:.

• Full or broadline distributors handle a variety of products including frozen, refrigerated,

staples, paper goods, cleaning material, and even small equipment. They belong to a buying

group which may be organized as a cooperative or a corporation.

o Cooperatives benefit from increased buying power by belonging to a co-op, but each

location is autonomous.

o A corporation may require members to adhere to certain policies and often assign

territories for bidding purposes. The two largest corporations are US Foods and

Sysco.



• Specialty wholesale distributors carry only one line of products such as snack crackers or

all-beef products.

• Special breed distributors deliver to specific sites such as restaurant chains like Wendy’s or

McDonalds.

• Supermarket or wholesale clubs are businesses such as Sam’s Club or Costco. Some of

these clubs may offer bids on school business but are not usually equipped to deliver to all

schools.

SAY: Broadline distributors sell under private label brands that represent different qualities.

DO: (Workbook Activity) Private Label Brands Comparison Chart

SAY: Look at the private label brands comparison chart in your workbook.



Private Label Brands Comparison Chart

Company or Group 1st Quality Labeling 2nd Quality labeling 3rd Quality Labeling

ALL KITCHENS Emerald/Green Blue Red

CODE Elite / Regal Majestic -----

COMSOURCE Medallion / Merit Traditional Citation

FROSTY ACRES Gold / Frosty Acres Garden Delight -----

GOLBON Golbon

Green

Golbon

Red

Silbon

Blue

GORDON FOODSERVICE

GFS Premium Quality

GFS -----

NIFDS NIFDS—Prime Pak Chef – Pak Econo-Pak Brown

NUGGET Black Red Green

PARADE Red Blue Yellow

PLEE-ZING Pleezing – Blue Little – Mommie / Red Partake – Green

POCAHONTAS Pocahontas Mount Sterling Wigwam

SYSCO

Supreme – Gold

Imperial – Blue

Classic- Red

Reliance – Green Value Line – Brown

U.S. FOODSERVICE

Blue Red Harvest Value



ASK: How can you verify that you received first quality from Parade? (Answer: Red Label)

What about Nugget? (Answer: Black Label) All Kitchens? (Answer: Green Label)

SAY: If you look at the chart, Red label represents first quality for Parade, second quality for

Nugget and third quality for All Kitchens. For this reason, the school nutrition director must pay

attention to detail when writing product descriptions, evaluating, and awarding bid items.

Instructor’s Note: Continue to go over the chart and ask questions until all participants

understand how to compare private labels.

SHOW: Slide #5, Current Customer Base

Current Customer Base

10%40%

4%

2%

4%

10%10%

10%

10%

Restaurants

Other Non-commercial

Correctional Facilities

Colleges/Universities

School Foodservice Health Care

Other Commercial

Hotels/Lodging

Convenience Stores

SAY: Many school nutrition directors feel that school foodservice is a big part of distributors’

business, and it was years ago. That is no longer the case. Currently, school business represents

only 10% of a distributor’s customer base. In many cases, distributors do not care to bid on

school nutrition products because the profit margin is less for school business. Schools do not

always pay promptly, and school districts are often perceived as unfair. Distributors believe

schools do not compare products fairly and that they play favorites.



SHOW: Slide #6, Today We Are in a Seller’s Market

UNIT II - Chapter 3 - 7

Today…

We are in a Seller’s Market.

SAY: Today, school districts represent buyers that currently operate in what is known as a

seller’s market. That means the seller is at an advantage and the school nutrition program must

promote itself as a worthwhile buyer. Many distributors demand schools agree to a minimum

dollar amount for each delivery in order for the company to agree to deliver to each school site.

ASK: Do any of you have minimum delivery drops? What is the dollar amount? (Ask

participants to share if they answer yes.)

SHOW: Slide #7, To Sell Themselves, Schools Can Emphasize…

To Sell Themselves, Schools Can Emphasize . . .

• No change in ownership• No bankruptcy • Fair pricing process • Early week delivery• No deliveries on major holidays• School district profile



SAY: School districts need to remind prospective distributors that

• school systems never change ownership,

• they never go bankrupt, and

• someone will always bail out the school nutrition program.

Other selling points to remember are

• Schools prefer delivery early in the day and early in the week as opposed to restaurants

whose busy times are generally weekends.

• Schools are closed on major holidays – again a busy time for most other customers of the

distributors.

• Schools provide the distributor with a concise picture/profile of the school. This is important

because distributors want to know total annual expenditures on food and supplies, number

and frequency of deliveries, average daily participation, enrollment figures, and special

requirements such as refrigerated trucks.

DO: (Workbook Activity) School Cooperative Profile (Have participants go over profile.)



School Cooperative Profile 2001 Central Avenue, Hometown USA: Child Nutrition Statistics

School Year 2010-2011

ADP $ SPENT # OF SCHOOL

COUNTY OCTOBER 2010 ENROLLMENT FOOD & PAPER DELIVERIES - '10-'11

Lunch Brkfst OCTOBER 2010 ANNUAL 2008-

09 Frequency PER MONTH 1 2 4 8

Bay 2,994 2,198 4,687 1,069,764.95 15

Core 9,000 4,200 12,485 2,028,000.00 24 2

Den 20,828 10,154 31,702 5,336,816.50 69

Forest 2,703 1,615 3,685 897,193.36 10

Lorna 4,215 2,697 6,531 580,657.35 17

Metro 2,910 2,120 4,320 1,150,000.00 10 2

Nate 1,540 3,169 4,688 718,824.00 12

Taylor 6,600 3,600 9,048 2,300,000.00 18 4

Waverly 4,783 2,166 7,733 1,821,325.93 19

TOTALS 55,573 31,919 84,879 $15,902,582.09 194 8

Total Number of Deliveries in 2008-2009 school year: (36 weeks of delivery to 194 schools plus 8 schools receive 72 deliveries) 36 weeks x 194 schools 6984 72 deliveries x 8 schools 576 TOTAL 7560 deliveries Total Expenditures (2008-2009) = 15,902,582.09 Average $ amount per delivery TOTAL = 2,103.52 Current Bid Section A Food & Supplies Brands Approved - March/April Bid Issued - June 2010 Bid Awarded - August – 1st week Contacts Co-Chair: June Smith Phone: Fax: E-mail:



Objective 2: Define the role of ethics in procurement

SHOW: Slide #8, Objective 2

Objective 2

Describe the role of ethics in procurement

Say: Our second objective for today is to recognize the role of ethics in procurement.

SHOW: Slide #9, Unethical Behavior

Unethical Behavior

• Providing cost information to competitor PRIOR to supplier selection

• Sharing supplier’s proprietary information with competitor

• Accepting gifts or cash • Accepting free trips or entertainment



SAY: Contact and interaction with industry representatives is encouraged. However, it must

ALWAYS be ethical. Unfavorable publicity due to questionable behavior with business partners

is damaging to all–and sadly, it taints the reputation of the entire school nutrition program.

ASK: Can you think of actions that would be considered unethical behavior in the purchasing

process? (Allow participants to discuss the topic until most situations have been covered.)

DO: (Workbook Activity) Unethical Behavior

FEEDBACK: (Include these ideas if no one mentions them.)

• Providing cost information to the competitor or to another supplier prior to the bid opening

sets up a situation where the results could be altered; Although the business benefiting from

the information may be pleased, they could reveal the discrepancies at a later date and

implicate the school nutrition director.

• Sharing supplier's proprietary information with the competitor; Do not mention one vendor

to another and never suggest to Vendor B, “Vendor A will give a 1% discount, will your

company?” Sharing this type information can have tragic results–no company will do

business with a school district that allows this to happen.

• Accepting gifts, cash, free trips, or entertainment for personal use; Even if the director’s

immediate superior says these are acceptable, they are not in the eyes of the federal

government. The school district should have this policy in writing and provide training for

all staff.

• Allowing personalities to enter into purchasing decisions

• Giving preference to a supplier based on long-term business relationship, political

connections, or pressure from management



SHOW: Slide #10, Ethics Rule of Thumb

Ethics Rule of Thumb:

“If you question an action, then you should not proceed.”

UNIT 1 - Chapter 1 - 6

SAY: Look at the screen for the “Ethics Rule of Thumb.” (Call on someone to read the

information on the screen.) The rule is provided in your workbook as a reminder.

“If you question an action, then you should NOT proceed.”



Objective 3: Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases SHOW: Slide #11, Objective 3

Objective 3

Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases

SAY: Our third objective for this lesson is comprehensive and will take time to absorb. It is to

identify federal, state, and local procurement regulations, policies, and procedures governing all

school nutrition program purchases.

SHOW: Slide #12, Procurement Guidelines

Procurement Guidelines

What are they?• Federal Standards• State Standards• Local Standards

Which do you use?• Most restrictive

SAY: One of your major responsibilities as a school nutrition director is to know procurement

guidelines and ensure they are practiced. There are federal, state, and local standards that must

be followed when you are using taxpayer’s money–which is true in all three government areas.



The dilemma sometimes comes when the three government branches have standards that

conflict. The rule of thumb that is the most restrictive standard applies. If federal standards

require bidding when spending is $100,000 and the state standards require $75,000, the school

district must abide by the state standard of $75,000.

The school nutrition director must be responsible for finding the state and local standards that

apply to the school district for purchasing. I strongly recommend that you discuss and request

the state standards from your state agency and local standards from your school business

manager.

Federal Purchasing Regulations

SAY: As we review the laws and guidelines, remember that it is not the role of the NFSMI to

interpret the regulations; but rather to make sure that you are aware there are very specific rules

that must be followed when you purchase products for the school nutrition program. You must

rely on your state agency and your local district to provide further explanation of the

procurement regulations.

Before we review the regulations, take a minute to complete a short survey about your

understanding of purchasing regulations. There are seven statements in the survey. Check

whether you agree or disagree with each statement. You can verify your answers as we discuss

the federal regulations that govern the procurement process. (Allow no more than 2 minutes.)



DO: (Workbook Activity) Purchasing Sense Survey

Procurement Practice Agree Disagree

1. To purchase items costing more than $100,000 in the aggregate requires a formal purchasing method. Public organizations must follow the most restrictive of local, state, or federal law or rules.

2. Geographic preference, commonly called “local preferences,” is not allowed.

3. Any vendor who writes the specifications for major equipment is not allowed to participate in the bidding.

4. Cost plus a percentage of cost purchase is not an allowable purchasing system.

5. Only responsible contractors who possess the ability to perform successfully can get contracts under the terms and conditions of a proposed procurement.

6. The purchase system must ensure open and free competition.

7. Schools must maintain written selection procedures for awarding bids.

8. School food authorities are required to the maximum extent possible to use domestic commodities.

SAY: Now that you have agreed or disagreed with each statement, we will look at what they

convey to us in more detail.



SHOW: Slide #13, Federal Regulations

Federal Regulations

• 7 CFR Section 3016• http://www.access.gpo.gov/cgi-

bin/cfrassemble.cgi• $100,000–Use formal purchase method OR

state requirement if less• No geographic preference allowed• Vendor who writes specs cannot offer price• Cost plus a percentage of cost NOT allowed

SAY: Federal Regulations pertaining to procurement are found in 7 CFR Section 3016. Follow

along and make notes as we discuss some of the information about rules governing purchasing.

1. Federal regulations require the use of a formal purchasing method when spending $100,000

in the aggregate, which applies to even the smallest school system. If state regulations are

more restrictive, the state regulations apply.

2. Federal regulations prohibit geographic preference. Some states have laws that allow a

percentage deducted from an in-state vendor’s quote–which obviously gives an advantage

over any out-of-state firm.

3. Any vendor who assists in writing specifications for an item a school district plans to

purchase is not allowed to participate in bidding for that item. This means that if you get a

local equipment distributor to write specifications for a piece of equipment, that distributor

cannot bid to sell you the equipment. However, you may invite several vendors to discuss

important features of the item you wish to purchase. Take copious notes from each



conversation; and after all meetings conclude, find the common features mentioned by all

and use those in your description. This protects you and does not give an advantage to any

one vendor.

4. When using federal funds, one may NOT engage in a cost-plus-percentage contract. The

district may use a contract which requests a price for the cost of the product and a “fixed fee”

for each. At no time during the contract or extension of the contract may the fixed fee be

changed.

SHOW: Slide #14, Federal Regulations

Federal Regulations

• Only responsible contractors• Open and free competition• Written selection procedures• Staff may NOT accept cash or gifts• Domestic commodities

5. School districts are not required to do business with irresponsible businesses. However, you

must be careful to document such behavior in writing and maintain that information in a

manner that could be used in a court of law.

6. The district must maintain free and open competition. This means that any organization

accepting and spending federal funds MUST allow any company the opportunity to

participate in school business. For example, if a company only sells beef products and

requests to submit a bid on the school district’s beef products, the district bid must be



organized so that one section contains only those beef products, allowing that vendor a

chance to participate in the bidding process. Remember, this particular regulation can result

in legal implications.

7. School districts must maintain written procurement procedures – and must establish a policy

that no district employee may accept cash or gifts from a vendor or prospective vendor.

8. Domestic commodities refer to foods grown in the USA. Agencies accepting federal funds

may not purchase foods grown in another country unless it is not produced in the USA or is

not found in sufficient amounts. Examples of foods acceptable from other countries are

pineapple, olives, coffee, tuna, and Mandarin oranges.

The Federal Trade Commission requires that any food grown and packed in another country

include a statement of origin on the label. For example, the label must read “Product of (country

of origin).” If the food was grown in another country and packed in the U.S., it will not be

obvious on the label.

The Regulatory Environment

SAY: There are several federal agencies that impact food used in school nutrition programs.

They establish standards for food products and monitor their compliance.



SHOW: Slide #15, Food and Drug Administration

Food and Drug Administration

Food, Drug, and Cosmetic Act• Controls labeling of food products• Prohibits misbranded food productsadulterated food products

• Establishes standards of identity, quality, and fill• Nutrition Labeling & Education Act - 1990

SAY: A major player in monitoring the quality of food is the Food and Drug Administration

(FDA). The Food, Drug, and Cosmetic Act gives FDA the authority to control the labeling of

food products. It prohibits manufacturers from misbranding food or allowing adulterated foods.

A valuable tool when writing bid descriptions is the FDA Standard of Identity.

DO: (Workbook Activity) What is a Standard of Identity?

ASK: Can anyone tell me what is meant by the term Standard of Identity? (Pause to allow

participants an opportunity to answer.) Will someone locate the definition in your workbook

and volunteer to read what Standard of Identity means? (Call on someone who locates the

answer.)

FEEDBACK: A Standard of Identity label is the mandatory, federally set requirements that

determine what a food product must contain in order to be marketed under a certain name in

interstate commerce. For example, the law requires a specific percent of eggs and oil in any

product labeled Mayonnaise. Consequently, when including it on a bid, the description can



merely say “mayonnaise.” Additional terms may be added such as “Lite” or “Reduced Fat” to

add specificity.

The Nutrition Labeling and Education Act of 1990 is also administered by FDA. The law gives

FDA the authority to require nutrition labeling of most foods regulated by the agency and to

require that all health and nutrient content claims such as ‘high fiber’ or ‘low-fat’ meet FDA

regulations. Effective January 1, 2006, the Nutrition Facts Labels on packaged food products are

required by the FDA to list the grams of trans fat contained within one serving of the product.

Remember, trans fats are not allowed in school nutrition products!

SHOW: Slide #16, USDA Grade Standards

USDA Grade Standards

USDA Grade AUSDA Grade BUSDA Grade C

SAY: USDA is another federal agency that establishes standards for products. USDA marks

products that the agency inspects and grades during packing. Label designations are either in a

grade shield or a label that indicated the product was packed under inspection of the U.S.

Department of Agriculture. There are three Grade Standards–A, B, and C. For example, fruits

and vegetables that are designated as Grade A products have a better appearance, fewer

blemishes, and fewer broken pieces. There is no difference in nutritional levels of Grades A, B,

and C.



SHOW: Slide #17, USDA: Poultry and Meat Inspections

U.S.D.A.Poultry and Meat Inspections

• Poultry Products Inspection Act/Wholesome Poultry Products Act

Prevents misbranded or adulterated poultry products

• Meat Inspection Act

Established meat inspection program

SAY:

• The Poultry Products Inspection Act and the Wholesome Poultry Products Act

established compulsory federal inspection of all poultry moving across state lines and in

foreign commerce. The act also requires that state standards be at least equal to federal

standards.

• Meat Inspection Act establishes standards for meat inspection and grading. It ensures a

high level of cleanliness and safety of meat products.



SHOW: Slide #18, USDA: Inspection Marks

U.S.D.A. – Inspection Marks

Processed Meat

Raw Poultry

Raw Meat

SAY: There are three types of inspection marks shown on the slide. The first is found on all

processed meat products and carries the establishment number of the manufacturing facility in

which the product was processed. The inspection mark carries the abbreviation EST followed by

the establishment number where the product was processed. Each plant is given a number.

Products processed in a poultry plant will be preceded with a “P.” This is important information

for the buyer. For example if the establishment number of frankfurters that are described as “all

meat” is preceded with a “P,” the franks probably contain chicken or turkey.

The second inspection mark shown on the screen is found on raw poultry, and the third

inspection mark is used to label raw meat. Raw meat is stamped with a roller that runs the entire

length of the carcass.

ASK: Why is it important to recognize and interpret the establishment number in the school

nutrition program? (Allow a couple of participants to volunteer answers.)

FEEDBACK: When there is a USDA recall, the order will specify the establishment number. It

is important to learn to recognize these numbers and where they are located. The government

link for recall information is http://www.fsis.usda.gov/fsis_recalls/open_federal_cases/index.asp



For more information about establishment numbers, a publication entitled Urner Barry’s Meat

and Poultry Directory lists all establishment plants by number, company name, addresses, and

contact information. The link for Urner Barry is http://www.urnerbarry.com/.

A link to the Meat, Poultry, and Inspection Directory, a government link for establishment names

and numbers is

http://www.fsis.usda.gov/regulations/Meat_Poultry_Egg_Inspection_Directory/index.asp.

DO: (Workbook Activity) Label

SAY: You have a sample label in your workbook that has an establishment number, a product

code number, CN label number, and the run number. Find each number, circle, and label the

number. (Allow 2 minutes for participants to complete the activity.)

SHOW: Slide #19, Know Manufacturer’s Code Number and Establishment Number

Know Manufacturer’s Code Numberand Establishment Number



SAY: Check your answers with the label on the slide or the label provided in your workbook.

• The establishment number identifies the plant where the product was processed. A

manufacturer may operate several plants and a product could be produced in more than one

plant, but in the case of a recall, only the plant where the contamination occurred is listed in

the recall order.

• Each manufacturer has a product code number assigned to each and every product. While

different distributors may have the same manufacturer’s product in their warehouses, each

distributor assigns a code number pertaining to their inventory. It is important for receiving

personnel to distinguish the difference between these code numbers.



• The CN label is for a specific product assigned by USDA. It verifies the product’s

contribution to the Child Nutrition Program requirements and specifies the number of pieces

that must be served to comply with the label verification.

• The “Run” number identifies the production line, and the last few digits correspond to the

manufacturer’s code number.

This sample label is useful for training receiving personnel about establishment and code

numbers for manufacturers. It is important for school nutrition directors to train the nutrition

staff to read labels and recognize the establishment and product code numbers.

SHOW: Slide #20, U.S. Department of Commerce – Fish and Wildlife Act.

U.S. Dept. of CommerceFish and Wildlife Act

Est. 036PUFI Seal


SAY: Another federal agency that impacts food safety and quality is the U.S. Department of

Commerce (USDC). Fish products are inspected and certified under the USDC Seafood

Inspection Program. Only those products which meet all specified requirements and criteria can

bear one or more of the official marks or statements associated with the program. The stamp on

those products may resemble either of these stamps on the screen.



The U.S. Grade A mark signifies that a product meets the highest level of quality established by

the applicable U.S. grade standard and has been processed under the USDC Seafood Inspection

Program in a sanitarily approved facility. For example, if a fish product is Grade A, there is

more actual fish in the product.

The Processed Under Federal Inspection (PUFI) mark or statement signifies that the product is

certified to be safe, wholesome and properly labeled; conforms to quality and other criteria in the

approved specification; and has been officially inspected in a participating establishment under

federal inspection.

The HACCP mark may be used alone or in conjunction with existing grade marks to distinguish

that the product was produced under the HACCP Quality Management Program. The following

link provides further information: http://www.seafood.nmfs.noaa.gov/ServicesBrochure.pdf

SHOW: Slide #21, Additional Laws

Additional Laws

• FDA - Public Health Service ActModel Food Code

• U.S. Customs Service - Tariff Act Labeling of imported foods – “Product of

(country)”• U.S. Dept of Justice - Antitrust Laws Sherman, Clayton, Robinson-Patman, and Federal

Trade Commission ActsOpen and free competition

Chapter 2: The Regulatory Environment 21

SAY: There are a few additional laws that impact food procurement. They are shown on the

slide.



• The Public Health Services Act developed model codes to assist state and local

governments to initiate and maintain effective programs to prevent foodborne illness. FDA

maintains an updated Model Food Code to assist food control jurisdictions at all levels of

government.

• The U.S. Customs Service, as part of The Tariff Act, requires a statement of the country of

origin on the label of imported foods. If the food was grown in another country and packed

there, the label will include the statement of origin; foods grown out of the country and

packed in the USA will not always indicate the country of origin.

• The U.S. Department of Justice through The Antitrust Laws such as the Sherman Act, the

Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act prohibit

unreasonable business practices that deprive consumers of the benefits of competition.

SHOW: Slide #22, USDA Food Safety and Inspection Service: Names on Labels

USDA Food Safety and Inspection Service: Names on Labels

• Ham - must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is permitted

• Ham - water added: The product is at least 17.0% protein with 10% added solution.

• Ham with natural juices: The product is at least 18.5% protein.

• Ham Salad: Product must contain at least 35% cooked ham.

SAY: The Food Safety and Inspection Service under the USDA provides definitions and

standards of identity or composition. For example, in order to be labeled as “Ham,” the product



must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is

permitted in a product labeled as “Ham.”

• Ham - Water Added: The product is at least 17.0% protein with 10% added solution.

• Ham with Natural Juices: The product is at least 18.5% protein.

• Ham Salad: Product must contain at least 35% cooked ham. Chopped ham may be used

without it appearing in the product name.

• Ham and Water Product: The added solution may exceed 10%; the label must state percent

by weight of added ingredients.

SAY: Be sure to check your buying guide when purchasing ham or ham products. It will take a

larger portion to meet meal requirements if water is added to the ham.

Objective 4: Identify various types of acceptable purchasing systems


Objective 4

Identify various types of acceptable purchasing systems

SAY: Our next objective is to identify various types of acceptable purchasing systems.



SHOW: Slide #24, Four Purchasing Methods

Four Purchasing Methods

• RFQ: Small purchase procedure

• IFB: Competitive sealed bids

• RFP: Request for proposals

• Noncompetitive negotiation

SAY: There are four purchasing methods allowable by Federal Regulations. They are listed in

your workbook.

1. Request for Quote (RFQ) is used for making small purchases such as an item ordered for a

special holiday. An example could include a Christmas or Valentine cookie. A description

of the item must be written and then at least two vendors contacted for a price quote. The

transaction must be documented in writing.

2. Invitation for Bid (IFB) is a sealed bid prepared and mailed to various vendors. They must

return the bid by the specified time and day after which the district will evaluate and award

the contract to the lowest bidder.

3. Request for Proposal (RFP) is a method that permits evaluation of additional conditions that

may be as critical as the costs. This is a particularly good method to use for purchasing



services such as general repair or pest control, and items such as large equipment, computer

hardware, and computer software.

4. Noncompetitive negotiation requires only one vendor; however there are stipulations that

must be observed.

a. It must be USDA authorized.

b. One vendor may be used in case of emergency as defined by USDA.

c. The product being purchased must be a “one source” item and documented as such.

Invitation for Bid

SHOW: Slide #25, Sections of a Formal Bid

Sections of a Formal Bid

1. Transmittal & signature pages2. Standard terms & conditions3. Special instructions4. Product list & descriptions5. Billing address & delivery locations6. Potential bidders

SAY: A formal bid document contains several sections that should be included in all bids. You

may want to refer to Appendix A in your workbook as we discuss the various sections.

• Section 1–Invitation to Bid, signature, and transmittal page. It should contain a certification

statement related to debarment or suspension.

• Section II–Standard Terms and Conditions. Examples of items in this section might be

o How and when the bid shall be returned



o Explanation of bid terminology

o Declaration of conditions for bottom line

o Conditions and steps for contract cancellation

o All federal requirements

• Section III–Special instructions. This section might contain information about

o extensions, drained weights, brands approved, whether to offer alternate brands or

substitutions,

o evidence of vendor participation in HACCP,

o guidelines for escalation/de-escalation, and

o vendor practice regarding check of criminal records of delivery personnel.

• Section IV– Product List and Descriptions. In this section, the list of products to be

purchased, along with descriptions, and approved brands are detailed.

• Section V–Billing Address and Delivery Locations. This section specifies the delivery

locations by name and street address. It might also indicate the delivery frequency of such

locations. For example, a notation of schools that require delivery during the summer months

should be included here.

• Section VI–Potential Bidders. Include a list of vendors that have been pre-approved to

receive the solicitation for bid. Including a list of potential bidders will indicate competition

and may result in better pricing.

Bid Awards

SAY: The two basic methods for awarding bids to vendors are line item or bottom line.

• In a line item award the price offered on each product is considered independently.



• In bottom line awards the prices offered on products are considered as a group.

A formal bid must identify which method will be used.

Vendor Award Method: Line Item

ASK: How many of you use line item? (Pause and allow participants to raise their hands.)

How many of you use bottom line? (Pause and note the number.)

SAY: Look in your workbook for an example of a line item award based on the lowest price.

SHOW: Slide #26, Line Item Award

Line Item Award

Product NamePotential Vendor A

Potential Vendor B

Potential Vendor C

Peaches $20.36 low $22.94 $23.41

Pears $22.49 $23.95 $22.46 low

Sugar $19.06 $18.75 low $21.45

SAY: In this line item award, the peaches are awarded to Vendor A, the sugar to Vendor B, and

the pears to Vendor C.

Instructor’s Note: The chart below is in the Participant’s Workbook.

Vendor Award Method: Line Item

Product Name Potential Vendor A Potential Vendor B Potential Vendor C

Peaches $20.36 low $22.94 $23.41

Pears $22.49 $23.95 $22.46 low

Sugar $19.06 $18.75 low $21.45



SAY: Line item bids are more time consuming due to processing purchase orders and invoices

for several vendors. They are more cumbersome to monitor for receiving personnel since they

must remember several buying group quality labels. The delivery cost is almost the same

whether the distributor delivers one case or 100 cases. Line item bids offer the distributor no

guarantee about the number of cases that will be delivered or what is commonly called the

delivery drop size.

Vendor Award Method: Bottom Line

SHOW: Slide #27, Bottom Line Awards

Bottom Line Award

Product Name

Est.Units

Unit Price

Vendor A Ext.Total

Unit Price

Vendor B Ext.Total

Unit Price

Vendor C Ext.Total

Peaches 25 cs $20.19 $504.75 $22.02 $550.50 $21.50 $537.50

Pears 10 cs $20.94 $209.40 $20.48 $204.80 $21.50 $215.00

Sugar 15 bg $15.98 $239.70 $16.63 $249.45 $14.10 $211.50

Bottom line total

$953.85Low

$1004.75 $964.00

SAY: Bottom line awards makes business more attractive to distributors because the system

guarantees increased drop size. Hidden costs associated with school purchasing also go down

with bottom line, notably the cost of processing purchase orders, receiving, and invoice

processing. It is important for the school district to cooperate with distributors so they can

survive as solvent business partners; future affordable prices depend on that.

There is a chart that illustrates a bottom line vendor award in your workbook if you want to make

notes. Vendor A received the bid for the three items based on the bottom line results.



Vendor Award Method: Bottom Line

Product Quantity Potential Vendor A Potential Vendor B Potential Vendor C Name Unit Price Extended Unit Price Extended Unit Price Extended Peaches 25 cs $20.19 $504.75 $22.02 $550.50 $21.50 $537.50

Pears 10 cs $20.94 $209.40 $20.48 $204.80 $21.50 $215.00

Sugar 15 bags $15.98 $239.70 $16.63 $249.45 $14.10 $211.50

Bottom Line $953.85 $1,004.75 $964.00 Total low

SHOW: Slide #28, Grouping Categories

Grouping Categories

For open and free competition,group by specialists

SAY: When grouping products for bottom line bids, it is critical that the items are grouped so

they allow free and open competition. As a general rule, products are grouped according to

similar characteristic or use.



DO: (Workbook Activity) Bottom Line Categories Groupings

SAY: Work with your neighbors to identify items that might make up bottom line categories for

a typical district. (Allow a couple of minutes for participants to work on the groupings before

showing the next slide. Ask group members to share their ideas.)

SHOW: Slide #29, Bottom Line Categories

Bottom Line Categories

Milk

Equipment

Frozen, dry & refrigerated

Paper

Produce

Bread

FEEDBACK: Several apparent groupings might include:

• Milk and dairy products

• Bread and bakery products

• Paper and cleaning supplies

• Small equipment

• Frozen, dry, and refrigerated foods

• Produce; the best pricing for produce may be a weekly bid. The use of technology such as

the Internet and fax machine allows most districts to manage weekly bidding.



It is important to provide an estimate of the number of units the district expects to purchase in all

categories for the contract period. There can be a variance of plus or minus 10%. It is also

recommended that the district ask for a list of products the vendor has slotted specifically for the

school’s contract. It is wise to track those items and make every effort to provide estimates for

each item based on historical data. Estimates should be within 10% to 30% of actual needs. If

requested, distributors will provide an annual or monthly usage report which will help with this

task.

SAY: More and more companies want to be awarded the whole thing or nothing. But that does

not allow free and open competition, so it is important to divide your bid to allow smaller

companies an opportunity to bid.

SHOW: Slide #30, Prioritize

Prioritize:

•Money Spent

•Impact on meal quality

SAY: When you consider there can be as many as 700-800 items on a typical school bid, it may

be a little overwhelming. The time required for a school nutrition director to write 800 product

descriptions and judge the quality of each product is a huge responsibility. It is imperative to

prioritize your time and spend your efforts on the products where you plan to spend the most



dollars. And most importantly, the time and effort spent on the bidding process should include

consideration of how each product will impact the meal quality.

Objective 5: Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid


Objective 5

Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid

SAY: As we have said, one of the most important purchasing activities when assembling a food

bid is the development of specifications and descriptions along with the procedure for brand

approval. Our fifth objective is to describe how to develop and use specifications, descriptions,

and approved brands for assembling a food bid. Directors constantly struggle with this aspect of

procurement; especially when evaluating bids. Remember…you can’t compare apples to

oranges. Well written specifications or product descriptions can prevent you from facing this

dilemma. Let’s spend a few minutes discussing specifications and product descriptions and how

they are used to communicate the quality desired.



SHOW: Slide #32, Specifications and Descriptions

Specifications and Descriptions

Specifications: complicated and lengthy•May be a couple of pages for one product; labor intensive

Descriptions: short and measurable•Limited to those characteristics that are essential for communication with the supplier such as CN label •Can be identified by the receiver and measured at the point of receipt

SAY: A specification is detailed and complicated. Specifying one product may require a couple

of pages. For example, a commodity specification for frozen cooked breaded chicken nuggets

and patties is approximately 2 ½ pages long. The question is, “how are we to know all those

details on more than 300 different items purchased in a school nutrition program?”

An alternative to using specifications is the use of product descriptions. Descriptions

communicate to the manufacturer exactly what is being requested and are limited to the features

that can be identified by the receiver.

A valuable resource for bid descriptions is Choice Plus. It includes standards and suggested

descriptions for all food products including entrees, fresh fruits and vegetables, and grains and

breads. It is available online from NFSMI.



SHOW: Slide #33, Product Classification

Product Classification

One ingredient: Distributor's choice

One major ingredient: Private label

Multiple ingredients (highly processed): Manufacturer’s brand

SAY: A technique which maximizes valuable time is the classification of products in one of

three categories: Distributor’s Choice, Private Label, or Manufacturer’s Brands. In the next few

slides, we will identify what each classification means to you as a school nutrition director.

SHOW: Slide #34, Distributor’s Choice

Distributor’s Choice

NO Brand Restrictions

sugarsalt

SAY: Distributor’s Choice items are products like salt or flour. There is usually little difference

in the quality of different brands of salt. The school nutrition program may want to specify salt

as iodized, but the brand of salt does not affect quality and certainly not dollars spent.

SHOW: Slide #35, Private Labels and Quality



PRIVATE LABELS AND QUALITY

Third = Standard Substandard Quality (70-80) (below 70)

Second = Extra Standard Quality Standard

(80-90) (70-80)

First = Extra Fancy ChoiceQuality Fancy

(90-100) (80-90)

VEGETABLES FRUITS

SAY: Private labels are products packed under industry-accepted standards and labeled for one

of the private cooperative/corporate groups. These products normally contain one major

ingredient and other seasoning ingredients. An example of private label could be green beans or

canned peaches. You need to add a statement regarding the quality desired. For example, if you

will accept only the first quality green beans, then the product description would have to state

first quality.

• “First Quality” label designates Extra Fancy to Fancy for vegetables and Choice for fruits

such as peaches and pears.

• “Second Quality” labels are packed as Extra Standard vegetables and Standard fruit.

• “Third Quality” labels are packed Standard vegetables and Substandard fruits.

It is important to add the quality level of private labels that are acceptable when writing

descriptions of fruits and vegetables. It is also a good idea to add a chart showing label quality

of the Buying Groups in your area to the “Standard Conditions” section of the school nutrition

bid.



SHOW: Slide #36, Manufacturer’s Brand

1. High-volume products or products with quality problems

2. Identify on final bid

Manufacturer Code # Establishment # Maker 42104 Est. # 17842

Manufacturer’s Brand

SAY: Manufacturer’s Brand designates products that contain multiple ingredients, are highly

processed, and are subject to tremendous variations in quality among brands. There are several

facts to remember about Manufacturer’s Brands.

• They are usually high-volume items or items that do not have grade standards. Examples are

fish portions and processed chicken nuggets.

• The school nutrition director should test and pre-approve Manufacturer’s Brands prior to

issuing the bid.

• This category also applies to any product with which there have been quality problems – it

could occur with something as innocuous as crackers.

• Manufacturer’s Brands are identified on the bid with the manufacturer’s name, code number,

and establishment number.



SHOW: Slide #37, Sample of Item Classification on Draft Bid

Sample of Item Classification on Draft Bid

Item Description Item Classification Bid Unit

Est. Units

1516 Chicken, Pat; BR’D; white meat; NO VPP;w/dried egg; CN label verifies 2oz. M/MA; 3 oz

Approved brands only svg 215,639

2200 Peaches, Cling U.S. Choice; packed inpacked in juice; 6/#10

Private Label cs 500

6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25

SAY: A draft bid may look similar to the one on the screen after classification of items. Notice

the chicken patties are approved brands only. Peaches are specified as U.S. Choice Private Label

and salt is a Distributor’s Choice item.

DO: (Workbook Activity) Item Classification

SAY: Let’s see if you can determine which products to approve as distributor’s choice, private

label, or manufacturer’s brand. Locate the sample bid document with the descriptions for

chicken nuggets, peas, and shortening in your workbook. Read through each description and

decide which type of pre-approval you would provide. Take about 3 minutes and we will discuss

your decisions.



Sample Bid Document

Item Description Approved Brands Chicken nuggets, breast: fully cooked; breaded; NO dried whole egg: NO VPP; CN labeled to provide 2 oz. meat/meat alternate; max 5 pieces per serving. Approved Brands only _________________________________________________________________________ Peas, early green; First Quality; to be packed to US Grade A; #3 size; 6/#10 Private Label ___________________________________________________________________________ 7320 Shortening, baking and all purpose cooking: Vegetable oils; NO tropical oils Distributor’s Choice ___________________________________________________________________________

Note: The italic answers are blank in the Participant’s Workbook.

Instructor’s Note: Ask for a couple of volunteers to share their decisions.

SHOW: Slide #38, Brand Approval

Brand Approval

Brand orApprovedEqual/No

Brands

Pre-ApprovedBrands

Only

TWO APPROVAL SYSTEMS

SAY: There is no hard and fast rule when it comes to assigning approved brands to products. It

is really up to the school nutrition director and should be based on experiences with the various

products. Most directors spend their time approving brands for those items that are high dollar

volume and represent a large portion of the food budget.



There are two methods of brand approval.

1. Brand Name or Approved Equal or No Brand

2. Pre-Approved Brands Only

SHOW: Slide #39, Steps: Brand Name or Approved Equal

Steps: Brand Name or Approved Equal

1. Write product descriptions.2. Issue final bid.3. Open bids.4. Evaluate bids.5. Award bids.

Brand decision made here.

SAY: There is quite a difference in the number of steps in each procedure for approving brands.

When using Brand Name or Approved Equal, the school nutrition director will follow at least

five steps. They include

1. Writing product descriptions

2. Issuing the final bid

3. Opening competitor’s bids

4. Evaluating bids

5. Officially awarding the bid to the successful bidder

Brand selection decisions are made at the point of evaluation, which is a rather stressful time to

make such an important decision. Part of the stress results from the fact that the award is

generally made approximately four (4) weeks prior to food deliveries.



SHOW: Slide #40, Problems

Problems

• Decision of comparable quality made during bid evaluations

• Bidder allowed to determine “equal”

Brand Name or Approved Equal

Problems that tend to occur when using Brand Name or Approved Equal include the difficulty of

determining whether the brands offered are of comparable quality or are truly equal. There is

very little time to investigate and it is difficult to obtain the information required under a limited

time frame.

In addition, when this procedure is used, it is left up to the bidder to determine whether products

are of equal quality. Most school nutrition directors are not food technologists who are qualified

to identify quality. This opens up a situation that can easily turn into a confrontation between the

distributor who declares the brand offered is of comparable quality and the school district

director who feels differently.



SHOW: Slide #41, Approved Brands Only

Approved Brands Only

1. Write product descriptions & develop draft bid.2. Classify products asDistributor’s ChoicePrivate LabelManufacturer’s Brand

3. Hold individual pre-bid conferences.

SAY: When choosing the Approved Brand Only procedure, there are 13 steps compared to 5

steps when using the Brand Name or Approved Equal procedure. However, the end result has

the advantage that decisions are made at a time when there is less stress and more time to

investigate quality.

The steps that are required when using Approved Brand Only are

1. Write product descriptions and complete the draft bid.

2. Classify products as Distributor’s Choice, Private Label, or Manufacturer’s Brand

3. Hold a pre-bid conference with prospective distributors. Provide the conferees with the draft

prior to the meeting.



SHOW: Slide #42, Individual Pre-Bid Conference

Individual Pre-Bid Conference

• Explain classification system

• Explain brand pre-approval

• Request nutritional data & copy of labels of brands they want screened

• Discuss test schedule

• Order product to test

SAY: I want to talk about the logistics of holding a pre-bid conference before we continue

discussing the steps in pre-approval of brands. The school district should schedule each

company for an individual meeting of about an hour in length. During the meeting

• Review the draft bid with the company decision-makers and bid coordinator, not sales staff.

• Explain the classification system and remind those in attendance that all items classified as

Manufacturer’s Brand must be approved. The meeting provides the company with the

opportunity to identify brands which comply with product descriptions for testing purposes.

It is imperative that the company representatives understand that only brands listed on the

final bid may be bid–NO alternative brands may be added.

• Request that companies provide nutritional data and a copy of labels with ingredients listed

for each item submitted for testing. If the nutritional information is not acquired at this time,

it will be difficult to obtain later.

• Discuss test schedule. Inform the company that the district will order and pay for a case of

product to test. Tell companies when the test will occur and assure them they will be notified

of test results. Remind them again that nutritional data must be submitted.



• If two companies submit the same product brand and code for testing, distribute purchases of

test products so each company has some of the business.

• Record whether there are items that each company is unable to bid. This is critical in

grouping or sectioning the bid for open and free competition.

SHOW: Slide #43, Approved Brands Only

Approved Brands Only

4. Screen brandsPaper screenAppearance screenTaste screen

5. Notify potential bidders of screening results6. Accept alternative to brands that failed

SAY: The fourth step is to screen the brands.

4. There are three ways to screen brands – paper, appearance, and taste.

a. Conduct a paper screening by developing charts which allow comparison of

ingredient lists and nutritional information for products of the same description.

Other information such as brand name and code number, pack size, and label wording

can be added. Check annually to see if any data needs to be revised.

b. All products are prepared in typical school equipment and judged on appearance. If a

product is not appetizing in appearance the customers likely will not eat it.

c. The ultimate test of the product is the taste. However, the goal is whether the product

is acceptable–NOT whether one tastes BETTER than another.

5. At the conclusion of testing, notify bidders if any of their products failed.



6. Accept alternate brand for testing. Specify the date of the second brand approval.

SHOW: Slide #44, Brand or Approved Equal

Brand or Approved Equal

7. Screen second group of brands8. Issue final draft of product/brand list9. Conduct final pre-bid conference

Brand decisions already made.10. Issue bid11. Open all bids in a public meeting12. Evaluate final bids13. Award bids to the successful bidder

7. Screen the second group of brands.

8. Prepare the final draft of the product or brand list with all pre-approved brands listed beside

the appropriate products. The distributors will mark the brand they are bidding when

completing the document.

9. Conduct the final pre-bid conference. All companies attend and confirm they have the

opportunity to participate in the process. If there is a problem, the steps of the process

impacting the company in question must be revisited and adjustments made. At this time

Brand decisions are already made!

10. Issue the final bid.

11. Open all bids in a public meeting. The bottom line extended total for each section is read

aloud, companies are thanked, assured of notice of results after 3 to 10 days, and dismissed.

12. Evaluate final bids.

13. Award to successful bidder.



Testing Product

SHOW: Slide #45, Testing Product: Phase I

Testing Product: Phase I

• Purpose: choose which formula will be bid

• Products: from SAME manufacturer• Consider:Nutritional impactPriceTaste

SAY: In step 4, we referred to product testing. There are two phases for testing product. The

purpose of each is different and therefore the procedure is slightly different.

Phase I is when product formulas are established. Details that determine product descriptions are

identified, the effect that nutritional data has on meal nutritional analysis is considered, and a

decision is made as to whether or not the price of a particular formulation is acceptable.

Products of different formulations from the same manufacturer are compared at this step only.

ASK: What does the term formulation mean? (Allow someone to volunteer an answer.)

FEEDBACK: Formulations specify what ingredients are desired in the product. For example,

one school district may specify an all-beef frank. Another school district might prefer pork as

the predominant meat or a school district might specify beef and pork as predominant in the

ingredient list. Remember, the first item after the word “Ingredient” is the predominant by

weight of all ingredients listed.



To compare the effect of nutritional impact on meals, enter the same menu on all days of the

week into a nutritional analysis computer program. Insert products of different formulations on

each menu. The daily nutritional analysis will indicate the effect of each product on the meal

analysis.

SHOW: Slide #46, Major Components of Chicken Patties or Nuggets

Major Components of Chicken Patties or Nuggets

Meat block:a. Breast, white or breast w/rib b. Chicken , natural proportionc. Dark meat

Egg: Dried whole egg Vegetable protein product (VPP):

a. Flourb. Concentratec. Isolate

UNIT V - Chapter 8 - 20

SAY: Look at the example of product formulation for chicken patties or nuggets shown on the

screen.

• The major ingredient is the “meat block” or the type of chicken meat in the product. Breast,

white meat, or breast with rib meat is more expensive than chicken, which is approximately

50-65% dark meat.

• Dried whole eggs and vegetable protein products or soy products can be added to lessen the

cost.

• Vegetable protein products (VPP) are flour, concentrate, or isolate. Flour is least costly, and

isolate is the most expensive form. Vegetable protein concentrate is about 70% vegetable

protein and is basically defatted flour without the water-soluble carbohydrates. An isolate is



a highly refined or purified form of vegetable protein with a minimum protein content of

90% on a moisture-free basis.

SHOW: Slide #47, Testing Product: Phase II

Testing Product: Phase II

• Purpose: approve brands of the SAME formula

• Products: from DIFFERENT manufacturers• Consider:Nutritional comparabilityAppearanceTaste

SAY: Phase II is the testing procedure used after formulations have been established. • Products of the same formulation are tested from as many different manufacturers as

possible. The goal is to have as many brands as possible approved for each item to ensure

adequate competition. Pricing at this point should be similar–all bidders are on the same

level because they are all submitting similar products. Pricing is not an issue at this time.

• In this phase, the “paper screen” is completed to compare whether ingredients match the

description and to compare nutritional profiles. A maximum level of fat or sodium can be

decided; however, do not arbitrarily state a nutrient level because there may not be a product

available with the standard identified.

• As in Phase I, appearance and taste are considered during Phase II.



DO: (Activity) Taste Testing Product

Instructor’s Note: Purchase three frankfurter packages of different formulations. (Food safety

note: Heat frankfurters to an internal temperature of 165°F). Prepare for testing by cutting into

small tasting sizes, making sure that each participant will receive a sample of each of the three

formulations. Place on a small disposable plate with the samples marked A, B, and C. Provide

participants with toothpicks, paper plates, and napkin. Instruct the participants to taste each

sample and designate their preference A, B, or C. Record the results on flip chart paper and

then reveal the formulation, nutritional data, and price for each.)

SAY: Now that you have decided on your preference, I am going to survey the class to see

which one was the favorite. (Ask participants to reveal their choices; tally the results.)

SHOW: Slide #48, Taste Test Rules

Taste Test Rules

• Product delivered in full-case, sealed container

• Students rate product• Part of regular meal• Prepared in typical equipment• Test only one product per day• Allow NO company representatives• Do NOT disclose brand name

SAY: There are guidelines that the school district should follow when testing products. These

guidelines are listed in your workbook.

1. Ask for product in sealed cases. Do not accept products in anything other than the

manufacturer’s packing case.

2. Introduce the product as part of the regular meal and only test one product per day.



3. Prepare items in typical school equipment. Test some product in a holding cabinet if the

school commonly holds the product before serving.

4. Do not allow company representatives to be present. They are sales oriented and will try to

persuade acceptance because that will generate dollars to their benefit.

5. Do not tell children the brand name; most are subject to some brand prejudice.

6. Have students judge the product–voting “Yes, it is OK” or “No, it is not OK.” The goal is

not which tastes best but if it is acceptable.

DO: (Optional Workbook Activity) Taste Testing Product

Purchase three frankfurter packages of different formulations. (Food safety note: Heat

frankfurters to an internal temperature of 165°F). Prepare for testing by cutting into small

tasting sizes, making sure that each participant will receive a sample of each of the three

formulations. Place on a small disposable plate with the samples marked A, B, and C.

Provide participants with toothpicks, paper plates, and napkin. Instruct the participants to

taste each sample and designate their preference A, B, or C. (Record the results on flip chart

paper and then reveal the formulation, nutritional data, and price for each.)

DO: (Workbook Activity) Brand Approval

SAY: Look in your workbook at the item description for Chicken Nuggets 1516 on the Sample

Draft Bid form and the four sample labels that have been submitted for approval. Complete the

paper screen by examining the ingredient information. Work as a group to discuss and determine

which of the four products meet the bid description. Each group will report. Be able to justify

your answers.



Sample Draft Bid


Est. Units

1516 Chicken Nuggets; Br’d; white meat; NO VPP; w/dried egg; CN label verifies 2 oz M/MA; 3 oz min. wgt

Approved brand only (List Brands) svg 215,639

2200 Peaches, Cling U.S. Choice; packed in juice; 6/#10


6340 Salt, iodized; 24/26 oz Distributor’s choice cs 25

Instructor’s Note: Allow 10 minutes for group reporting and discussion about Brand Approval

activity.



LABEL #1

LABEL #2

BREADED WHITE FULLY COOKED HEAT AND SERVE INGREDIENTS.- White chicken, enriched wheat flour (niacin, reduced iron, thiamine mononitrate, riboflavin), water, dried whole eggs, enriched yel low corn flour (niacin, reduced iron, thiamine mononitrate, riboflavin), salt, sodium phosphate, soybean oil, modified food starch, spices, nonfat dry milk, leavening (sodium bicarbonate, sodium aluminum phosphate, sodium acid pyrophosphate), dextrose, enriched yellow corn meal (niacin, reduced iron, thiamine mononitrate, riboflavin), mono and diglycerides, dried whey, sugar, dried yeast, sodium alginate, natural flavor. Fried in vegetable oil.

HEATING INSTRUCTIONS: Deep Fat Conventional Convection Fry 350'F. Oven 400'F. Oven 375,F.

Frozen 3-3 1/2 min. 12-15 min. 8-1 0 min. Cooking recommendations should be used as a guide only - variations in time and temperature may be required for variations in quantities heated.

KEEP FROZEN

10821 NET WT. 11.25 LBS.

0306377 This 3 oz. fully cooked, breaded white chicken pattie provides 2.0 oz. equivalent meat/meat alternate and ¾ serving bread alternate for the Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Nutrition Service. USDA 8194).

Fully Cooked, Grilled

Chicken Breast Filets With Rib Meat, Chunked and Formed INGREDIENTS: Boneless chicken breasts with rib meat, water, vegetable protein product (isolated soy protein, magnesium oxide, zinc oxide, niacinamide, ferrous sulfate, vitamin B12, copper gluconate, vitamin A palmitate, calcium pantothenate, pyridoxine hydrochloride, thiamine mononitrate, riboflavin), seasoning [tapioca starch, salt, grill flavor (maltodextrin, grill flavor (from partially hydrogenated soy and cottonseed oils), modified tapioca starch and com syrup solids), dextrose, sodium phosphate, autolyzed yeast extract, garlic powder, onion powder, tocopherols]. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 8 - 10 min. at 400'F from frozen. CONVENTIONAL OVEN: 12 - 14 min. at 400'F from frozen. MICROWAVE OVEN: Cover product. Heat on HIGH for 2 minutes 20 seconds to 2 minutes 30 seconds or until warm.

KEEP FROZEN NET WT 13.5 LBS

0 00 25665 89413 8

P-986

PO BOX 5432, Homesville AL 45987

PO BOX 5432, Homesville AL 45987

Chicken Patties

CN

CN

CN CN



LABEL #3

LABEL #4

Fully Cooked, Breaded

White Chicken Patties-CN Smoke Flavor Added INGREDIENTS: White chicken, water, dried whole egg, tapioca starch, salt and sodium phosphate. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 12 - 15 min. at 300'F from frozen. CONVENTIONAL OVEN: 15 - 18 min. at 300'F from frozen. COMMERCIAL MICFIOWAVE OVEN: Place frozen patties on microwaveable tray. Cover. Microwave for 1 min. 40 sec. - 2 min. 45 sec., turning once, until warm.

Distributed by Whip-O-Will Farms, Inc. PO Box Y2K Jackson, MS 39207

P-2368

0 00 25665 60150 8 NET WT 13.50 LBS

Chicken Patties-CN

Fully Cooked

INGREDIENTS: Chicken, water, salt, maltodextrin, sodium phosphates, natural flavor, dextrose, hydrolzyed soya protein and spice. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 7 ½ - 8 min. at 400°F from frozen. CONVENTIONAL OVEN: 4 ½ - 5 min. at 375°F from frozen. MICROWAVE OVEN: to serving temperature of 140°F.

P-345

Old South Grill

0 00 25685 50150 8

Distributed by Whip-O-Will Farms, Inc. PO Box Y2K Jackson, MS 39207

654782

One 3.10 oz. fully cooked chicken pattie provides 2.00 oz. equivalent meat/meat alternate for Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Consumer Service, USDA 07M).

CN

CN

CN

CN

KEEP FROZEN NET WT 15.63 LBS.

123456

One 3.20 oz. fully cooked boneless chicken pattie provides 2.00 oz. equivalent meat/meat alternate for Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Consumer Service, USDA 07M).

CN

CN

CN

CN



SHOW: Slide #49, Final Bid

Final Bid


Est. Units

1516 Chicken Nuggets;Br’d; white meat; NO VPP;w/dried egg; CN label verifies 2 oz M/MA; 3 ozmin. weight

Whip-O-Will Farms 60150Est# P-246;

Variety 2543 Est# P-2543;Chickly Foods 10821 Est #

P-399;

svg 215,639

2200 Peaches, Cling U.S. Choice; packed injuice; 6/#10


6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25

SAY: Look at the second column for brands that met the bid description and successfully passed

the paper screen, appearance screen, and the taste test. Bidders MUST select one of the pre-

approved brands when bidding.

Request for Proposal

SAY: A second type of formal bid identified earlier in the lesson is the Request for Proposal

(RFP).



SHOW: Slide #50, Request for Proposal (RFP)

Request for Proposal (RFP)

• Allows evaluation of variables other than cost

• Cost should exceed 50% of total points

SAY: A Request for Proposal or RFP is a formal bid method that allows the school district to

include variables other than cost in the evaluation and award of the final bid. For example, when

purchasing items like large equipment or computers, the timely repair and availability of parts is

critical. RFPs are awarded on a point basis–100 points being the total any vendor can acquire.

The cost factor should always exceed 50% of the total points. The vendor with the lowest cost

receives the full points allowed for costs, and the other bidders receive a percentage of the total

points for cost.

The evaluation tool must always be included in the Instruction Section of the RFP. The vendor

needs to see all the criteria used to judge and award the contract.



SHOW: Slide #51, RFP Evaluation

RFP Evaluation

Evaluator name

CRITERIAMAX. PTS ALLOWED

SCORE AWARDED

1. Bottom Line Figure 55

2. Service 20

3. Available technical support 10

4. Availability of parts 10

5. History of reliability 5

TOTAL 100

SAY: This is an example of a score sheet for an RFP for a piece of equipment. It is

recommended that the score for cost should be 50% of the total while other criteria being

evaluated may vary depending upon the area that is most critical.

SHOW: Slide #52, RFP Budget Evaluation

RFP Budget Evaluation

Maximum: 55 pointsTwo responses: $4,000 and $5,000$4,000 = 55 points$4,000 ÷ $5,000 = 80%80% of 55 points = 44 points$5,000 = 44 points

SAY: This slide shows how to determine the score when there are two vendors. For example,

assume the maximum points awarded for price is 55. The school district receives two responses,

one for $5,000 and the other for $4,000. The lowest price of $4,000 receives all 55 points. To



determine the award points for the second response, divide the lowest price of $4,000 by the

second response price of $5,000 to get the percent, which in this case is 80 percent. Multiply

that percent by the total points to arrive at the number of points to award to the vendor. If there

is a third vendor, divide that response by the lowest price to determine the number of points to

award.

Direct to Manufacturer Bid

SHOW: Slide #53, Direct to Manufacturer

Direct to Manufacturer

• Sealed bids

• Line item for most products

• Firm price with petition for escalation/de-escalation

• Requires a bid for distribution

SAY: One other bidding method used occasionally is to bid directly with the manufacturer. A

direct-to-manufacturer bid is a formal sealed bid that consists of line items for the most part.

State agencies bidding for the entire state or very large districts can benefit from this type bid. To

be feasible, direct-to-manufacturer bidding must result in a large-volume contract. For example,

if a state or district decided to issue a direct bid to the manufacturer for chicken patties, they

would have to use 40,000 pounds of chicken patties once or twice a month for the company and

district to benefit. Bids require a firm price with the opportunity to petition for escalation/de-

escalation.



When direct-to-manufacturer bidding is used, a second bid is required with local distributors for

the delivery of the product. The contract essentially tells the distributor the price they will pay

for the products and asks for a fee for the storage and delivery of the product.

Before considering this type of contract, the district should seek professional guidance.

Remember, the distributor is the customer of the manufacturer.

Objective 6: Identify the basic types of pricing mechanisms


Objective 6

Identify the basic types of pricing mechanisms

SAY: The pricing system chosen by the school district establishes the degree of risk the vendor

must take when establishing a price. Our objective for this segment of the lesson is to identify

the three basic types of pricing mechanisms. These types are listed in your workbook with a

brief description.

DO: (Workbook) Pricing Mechanisms



SHOW: Slide #55, Pricing Mechanisms

Pricing Mechanisms

1. Firm for duration of contract

2. Market–Escalation/Deescalation

3. Cost + Fixed Fee

Fee may not increase duration of contract including extension

Monitored based on Market

SAY: The school must identify the pricing method in the bid documents. If the school district

changes the pricing mechanism, they must issue a new bid. Let's look at the individual pricing

methods that can be used to obtain product prices.

1. A firm price for a specified period of time requires the bidder to keep the price constant

during the entire length of the contract. The longer a distributor must keep prices firm, the

greater its risk, so the initial price will most likely be higher. Most firms would like to

change their prices every 6 months, or better yet, every month.

2. The escalation/de-escalation contract pricing may fluctuate. The initial price is based on

market cost at the time of the bid and increased or decreased based on third-party market

reports. This is typical of a dairy bid. The price of milk may change monthly. There is a

formula for calculating milk prices based on the Milk Market Report. You can access the

U.S. Department of Agriculture’s (USDA) Agriculture Marketing Service, Market News at

the address provided or subscribe to the monthly market report.

Instructor’s Note: The address is http://www.ams.usda.gov/AMSv1.0/MARKETNEWS

http://www.ams.usda.gov/AMSv1.0/MARKETNEWS�



3. An alternate pricing mechanism is to use a contract which requests a figure for the cost of the

product plus a fixed fee for storage, delivery, labor, profit, and any other overhead. The fixed

fee may NOT be changed during the duration of the contact. School districts using this kind

of pricing also offer the bidder the opportunity to increase or decrease cost only once or twice

a year. Escalation/de-escalation requests are awarded based on third-party market

bulletins/reports. The amount of increase granted should be no more than the amount the

market increased from bid award to time of request. The contract may be extended upon

mutual agreement by the school district and the vendor. Third-party market reports should

be monitored on a regular basis.

Firm Price Bid and Final Cost + Fee Bid

SAY: View the examples of how a Firm Price Bid and Final Cost + Fee Bid might look on a

spreadsheet. The firm price bid includes the product description, the approved brands, bid unit,

bidder’s price, number of estimated units, and the extended cost for that item. The contract for

cost + fixed fee has the same information except it includes a separate location for the fixed fee

and the total for cost and fee.



Instructor’s Note: The following forms are provided in the Participant’s Workbook. Check to

see that participants find the examples and follow along as you describe pricing methods.

Firm Price

Local Board 100 Central Avenue Anywhere, USA 00000 Extended total: $0.00 Item Description Approved Brands Bid Unit Unit Cost Est. Units Extended

Cost 1516 Chicken Nuggets; BR’D; white meat; No VPP; w/ dried egg; CN label verifies 2 oz. M/MA; 3 oz/min

Whip-O-Will Farms 60150 Est # P-246 Variety 2541 Est # P-2543 Chickly Foods 10821 Est # P-399

svg .0000 99,665 0.00

Final Cost + Fee Bid

Local Board 100 Central Avenue Anywhere, USA 00000 Extended total: $0.00 Item Description

Approved Brands

Bid Unit

Unit Cost

Unit Fee

Unit Cost + Fee

Est. Units

Extended Costs

1516 Chicken Nuggets; BR’D; white meat; NO VPP; w/dried egg; CN label verifies 2 oz. M/MA; 3 oz/min. serving

Whip-O-Will Farms 60150 Est # P-246 Variety 2541 Est # P-703 Chickly Foods 10821 Est # P-399

svg .0000 .0000 .0000 99,665 0.00



Objective 7: Describe how to develop a critical path plan for procurement


Objective 7

Describe how to develop a critical path plan for procurement

SAY: Each time the school district requests prices, regardless of the method used, the school

nutrition director should develop a critical path plan. Our next objective is to know how to

develop a critical path plan for procurement.

SHOW: Slide #57, To Develop a Critical Path

To Develop a Critical Path

• Determine delivery time• Complete time needed for each task• Start with delivery date & work back to

beginning date• Minimum of 36 weeks required



SAY: The critical path is an individual district plan that is based on when and how your district

operates. It includes a schedule of dates that will assure the bid is completed in time for delivery

of the first order of food.

Start the critical path by determining the first delivery date for opening of school. Determine the

tasks that must be completed in the purchasing process and the amount of time needed for each.

Starting with the delivery date, work backwards to determine when each step must be completed.

A minimum of 36 weeks is usually required to complete the entire procedure. This type of

planning can help the district nutrition director document the purchasing process and keeps the

process organized so that the nutrition staff always know what to do and when to do it.

An example of tasks to include in a critical path is provided in your workbook. This is an

example ONLY. Some school districts may add other tasks and the complexity will be

determined by the district bid method and products being bid. It is important to allow at least 4

weeks between bid issue and bid award and 3 to 4 weeks from bid award to delivery.

DO: (Workbook Activity) Critical Path for Procurement

Tasks Date

Develop the product list………………………………………………… _______________

Estimate quantities……………………………………………………… _______________

Conduct pre-bid conference…………………………………………….. _______________

Revise document and product list……………………………………..... _______________

Issue price requests……………………………………………………… _______________

Public opening of bids …………….…………………………………… _______________

Complete bid evaluation………………………………………………… _______________

Deadline to give superintendent……………………………………….. _______________



Approval………………………………………………………………… _______________

Notify vendor of bid award…………………………………………….. _______________

First delivery……………………………………………………………. _______________

SHOW: Slide #58, Evaluation/Re-evaluation

Evaluation/Re-evaluation

SAY: As we wrap up the section on procurement, remember, it is important to constantly review

the bid. Check each year to be sure the approved brands are still in production. Nothing exposes

lack of attention to the bidding process as quickly as out-of-date brands.

Objective 8: State the basics of receiving and inventory management


Objective 8

State the basics of receiving and inventory management



SAY: Our last objective for this lesson is to state the basics of receiving and inventory

management and how they relate to an effective procurement system. An inventory management

system encompasses all aspects of managing a company’s inventories: purchasing, shipping,

receiving, tracking, warehousing, storage, turnover, and reordering. It is an important part of

directing school nutrition programs because food and supplies inventories represent operating

funds that are committed and cannot be used elsewhere.

SHOW: Slide #60, Receiving is…

Receiving is . . .

. . . the critical link in procurement and food quality

Receiving products is absolutely the critical link in the procurement process because it impacts

protection of food quality and assuring that the bid contract is being followed. If school nutrition

directors do not take the time to train receiving staff, all efforts of assembling and producing the

bid are in vain.

A bid with perfect descriptions and accurate estimates is worthless if receiving personnel allow

the wrong products to come in the back door. All the efforts in selecting and testing quality

products are for naught if distributors are permitted to substitute inferior product. If the product

is handled improperly in delivery so that the quality is compromised, all the hours spent in brand



approval for a quality product are wasted. Food quality problems are quite often caused by

breakdowns in receiving procedures.

SHOW: Slide #61, Personnel Training

Personnel Training

• Inspecting deliveries using district receiving procedures

• Taking food temperatures• Reading food labels• Following district clerical

procedures• Reporting product quality problems

Chapter 13: Receiving and Storage 61

SAY: Efficient receiving relies on correct personnel training. The receiving personnel must be

trained to take food temperatures, recognize labels to ensure approved brands are delivered,

follow district receiving procedures for verifying product delivery, and use district clerical

procedures for reporting problems.

DO: (Workbook Activity) Receiving

SAY: I want you to take a few minutes to complete an activity that will help you identify and

implement standard receiving procedures.

Instructions: First, review the Standard Receiving Procedure and then complete the Checklist

for Product Receiving. Are these procedures in place in your district and do employees

consistently adhere to them? Check any problem areas and use the checklist as a guide for

improvement when you return to your district.



A Standard Receiving Procedure

STEP 1: The receiving area is ready and organized to receive food and supplies and a trained

designated individual is available to check in the order. Pen and receiving ticket or market order are available at the receiving area.

STEP 2: When the truck arrives, expect the truck driver to knock at the locked outside entry at

the time designated. Note whether the driver is clean and in an appropriate uniform and whether the interior of the delivery truck is clean. The truck driver should present a copy of the invoice to be reviewed.

STEP 3: As the truck driver prepares to off-load food and supplies, the employee should inspect food deliveries immediately and thoroughly.

• Look for substitutions of “outs” (shortages) listed • Check labels, as appropriate, to determine delivery of approved brands • Be familiar with the order in which the food items appear on the invoice (for

example; dry, refrigerated, frozen items grouped together) and how the invoice is totaled. Follow your organization’s policy regarding whether to verify pricing.

STEP 4: Check in all food by category, starting with refrigerated and frozen items and ending with dry goods. Receiving personnel must follow district clerical procedures.

a. Inspect frozen products for signs of being thawed and refrozen (ice crystals). b. Visually inspect all items and look for signs of contamination or container

damage. c. Check the quality and the pulp temperature of fresh-cut produce. Insert the

thermometer between the produce bags; the temperature should be between 350 F and 400 F.

d. Check the temperature of milk. It should be below 400 F with no evidence of freezing because it does not retain texture once frozen. For every 5-degree increase in temperature above 400 F, the shelf life of milk and the quality are reduced by 50 percent. Milk should have no signs of spoilage such as putrid odor, off flavor, or a curdled consistency.

e. Count cases/boxes–note shortages invoiced but not delivered. f. Note any substitutions and determine if substitutions are acceptable. g. For appropriate products, check expiration dates and use-by dates. h. Check the product code number against the market order or receiving ticket. i. Have the driver mark shortages, damages, etc. on invoice. j. Remove any loose staples or fasteners to prevent cuts during storage.

STEP 5: Reject unacceptable goods and note on the invoice. Compare the market order with

the invoice to be sure that what was ordered was received, nothing left off or added. Report all product problems to the site manager using district procedures.



STEP 6: Sign the invoice after all the above steps have been completed and issues resolved. STEP 7: Using a permanent marker or stamp, write the receiving date on all appropriate food items.



Checklist for Product Receiving

Directions: Use the checklist to evaluate the receiving procedures in your district. OK Improve 1. One or more employees have been trained in the receiving procedure. □ □ 2. A list of product descriptions of product is available in the receiving area. □ □ 3. Trained receiving personnel recognize potential food safety problems. □ □ 4. Trained receiving personnel can recognize the quality of products based on the product descriptions. □ □ 5. Receiving personnel have been trained to recognize substitute items not specified on the market order or bid list. □ □ 6. Employees who are assigned receiving duties are scheduled time to perform the duties (daily work schedule). □ □ 7. A special area is designated for receiving. □ □ 8. The outside entry to the kitchen is kept locked. □ □ 9. The market order is available and used to check incoming deliveries. □ □ 10. All incoming products are appropriately inspected (visually inspected, counted, temperatures taken when appropriate), and the products are verified before the delivery invoice is signed. □ □ 11. A procedure is in place for reporting delivery problems. □ □ 12. Delivery shortages are noted on invoice and sent to district office. □ □ 13. Incoming products are dated to promote product rotation (FIFO). □ □ 14. Products are stored promptly after delivery (frozen food first, then refrigerated, then other). □ □



SAY: How many of you are implementing all of the 14 procedures on the checklist? If so, you

are to be commended. If you need to improve any of the procedures, keep the checklist for

further reference.

SHOW: Slide #62, Storage Guidelines

Storage Guidelines

• Use FIFO• Store in original packaging• Separate raw from cooked or ready-to-eat foods• Store min. of 6” off floor and away from wall• Keep areas clean and dry• Inspect and treat regularly for pests• Use clean equipment to transport• Store in appropriate area.

Chapter 13: Receiving and Storage 62

SAY: Storage is important to the overall operation of a school nutrition program because it links

receiving and production. Storage for food, paper goods, cleaning supplies, and chemicals must

be organized in a logical, consistent manner so they can be located easily for issuing and

counting during inventory. Again, training personnel is the key to storeroom control. Several

storage principles should be included when training personnel.

• The FIFO method (First In, First Out) is the most basic principle of food storage

organization. It means that the stock should be dated at the time of receipt and oldest stock

should be used first.

• Store food in original packaging.

• Separate raw from cooked or ready-to-eat foods.

• Store products a minimum of 6 inches off floor and away from wall.

• Keep storage areas dry and clean.



• Inspect and treat regularly for pests.

• Use clean equipment for transporting food to kitchen.

SHOW: Slide #63, Inventory and Cost Control

Inventory and Cost Control

• Inventory is a major component of cost control

• JIT (Just-in-Time) deliveries

• Limit days food supplies are in inventory

• Excess inventory = $ tied up

Chapter 4: The Product Movement Process 63

SAY: Using proper inventorying procedures is critical to controlling costs in the school nutrition

programs. Extra food in inventory ties up organization funds. However, unlike money in the

bank, the inventory of food and supplies does not earn interest.

• School nutrition programs should limit the amount of inventory.

• The amount of inventory needed in a school nutrition program is affected by the frequency of

food deliveries. If possible, school districts should receive Just-in-Time (JIT) food

deliveries.

• The maximum stock or inventory level should be the number of operating days between

deliveries plus 1 or 2 days. For example, school nutrition programs that serve 5 days each

week and receive deliveries once a week should have no more than 7 days of inventory at

one time.

• We need to remember that excess inventory equals money that cannot be used.



SHOW: Slide #64, Seven-Day Inventory

Seven-Day Inventory

Formula:


_____Annual $ for food______Number of serving days in year X 7 ( )

SAY: A formula for establishing a dollar amount for a 7-day inventory is shown on the screen.

This allows for a 5 days week plus 2 days. Divide the annual expenditure for food per school

site by the serving days in the school year and multiply by 7. By using this formula, the school

nutrition director can judge whether or not a school is “hoarding” excessive inventory of food

products.

SHOW: Slide #65, Standard Stock

Standard Stock

1. Determine number of cases neededa. Previous year’s invoicesb. Delivery frequency

2. Change with seasonal foods3. Add 50% to base amount4. Develop pre-printed order form


SAY: One technique for inventory control is to establish a standard stock level for items that are

used repeatedly such as portion-packed catsup. Use the steps shown on the screen to establish



standard stock. The procedures are also listed for your convenience should you decide to

implement them in your district.

• Determine the number of cases to maintain as a standard by reviewing previous years’

invoices and delivery frequency.

• Consider seasonal foods. For example, foods used more frequently during holidays would

not remain constant for the entire year.

• Once a pattern becomes apparent, add 50% to the base amount to arrive at the standard stock

level for the item. For example, if it is established that 6 cases of individual low-fat salad

dressing is the base amount, add 50% of the base amount or 3 to 6 for a standard stock level

of 9 cases.

• Develop a pre-printed order form to ensure efficient use of personnel time.

SHOW: Slide #66, Standard Stock Order Form

Standard Stock Order Form


Product Product #Current

InventoryStanding

OrderAdjusted

OrderIndividual

catsup 100445 2 cases 10 cases

Individual mustard 100569 ½ case 3 cases

Individual mayonnaise 100720 ½ case 1 case

Dill pickle 208965 1 - 5 gallon 1 - 5 gallon

8 cases

none

SAY: Look at the example on the screen. If there are 2 cases of individual catsup in inventory

and the standard stock is 10 cases, the order is adjusted to order only 8 cases. If there were 8



cases in stock, the order would be adjusted to 2 cases. Look at mustard. Since the standard stock

for individual mustard is 3 cases and there is only 1/2 case in stock, the full standard stock of 3

cases should be ordered.

Inventory management is a key factor in the successful operation of school nutrition programs.

Directors must ask themselves one question to determine if their systems are successful: Is there

adequate stock for production needs, and at the same time are inventory costs minimized?

SHOW: Slide #67, Cooperatives

Cooperatives

33,000

4,000

6,000

23,000

SAY: A word about cooperatives before we end the session, forming a purchasing cooperative of

school districts is one way to get better pricing and to pool the expertise of school nutrition

directors. Because of the increased volume purchased, cooperatives are attractive customers.

Together several districts have more bargaining power and more buying power. If you are

interested in becoming part of a cooperative, you might want to contact your state agency for

advice.



Follow-up Suggestions

1. Review your food descriptions to determine if you have items that are outdated or no longer

used.

2. If you do not have a critical path defined, develop one that gives you plenty of time to

incorporate the procedures of effective purchasing. If you already have a critical path,

review and modify if needed.

3. Provide a training session to all receiving personnel to emphasize the importance of their role

in the purchasing cycle.

4. If you are not following procurement procedures outlined in this lesson, plan to implement

change. You may need to take one step at a time, but the important thing is to commit to the

change and proceed.



Key Terms

Term Definition

Approved brands A system of determining acceptable quality prior to issuing a bid

Bid conference A meeting with potential vendors prior to requesting prices on a list of products

Bid document A written formal request for prices

Critical path plan The term used in manufacturing and construction industries to time the movement of supplies

Ethics A principle of right or good conduct; the rules or standards governing the conduct of the members of a profession

Market analysis An evaluation to determine the vendors in a specific market who can successfully service an account

Procurement The purchasing of goods and services using a multi-step process which involves distinct phases of planning, writing specifications, advertising the procurement, awarding a contract, and managing the contract

Product description A description that is limited to those characteristics that are essential for communication with the supplier and can be measured at the point of receipt

Purchase system The overall process used to purchase products within regulation

Receiving The process of evaluating for accuracy, accepting, and taking possession of an item that has been purchased

School district profile

A written description that communicates to vendors how a school district purchases. It contains statistics about the district, request for prices, facts about how products are screened, sales call policy, and any special requirements

Specification A statement that stipulates the complete and detailed definition of product requirements

Vendor evaluation

A review of the operating procedures of potential vendors to include product line, physical facilities, delivery equipment, financial history, service levels, accounting practices, and performance at bid conferences



Supplemental Resources

National Food Service Management Institute. (2008). Equipment purchasing and facility design

for school nutrition programs. University, MS: Author

National Food Service Management Institute. (2010). Orientation to child nutrition management

seminar participant workbook. University, MS: Author

U. S. Department of Agriculture, Agricultural Marketing Service. (2009). Market News.

Available at http://www.ams.usda.gov/AMSv1.0/MARKETNEWS

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.

U.S. Department of Agriculture, Nutrition and Technical Services Division, with the National

Food Service Management Institute. (1996). Choice plus: A reference guide for foods

and ingredients. University, MS: National Food Service Management Institute.

U. S. Department of Agriculture, Food Safety and Inspection Service. (2007). Ham and food

safety. Available at http://www.fsis.usda.gov/pdf/ham_and_food_safety.pdf


Management Institute. (2003). Choice plus: Food safety supplement. University, MS:

National Food Service Management Institute.



References

Martin, J., & Oakley, C. B. (Eds.).(2008). Managing child nutrition programs: Leadership for

excellence (2nd ed.). Sudbury, MA.: Jones and Bartlett Publishing.

National Food Service Management Institute. (2008). Equipment purchasing and facility design

for school nutrition programs. University, MS: Author.

U. S. Department of Agriculture, Food and Safety Inspection Service. (2007). Fact sheet: Ham

and food safety. Retrieved from http://www.fsis.usda.gov/factsheets/ham/index.asp


Management Institute. (2002). First choice: A purchasing systems manual for school

food service (2nd ed.). University, MS: National Food Service Management Institute.


Management Institute. (2003). Choice plus: A reference guide for foods and ingredients.

University, MS: National Food Service Management Institute.


Management Institute. (in press). State agency guidance on procurement, Topic 1:

general procurement requirements and responsibilities. Retrieved from

http://www.nfsmi.org/Templates/TemplateDefault.aspx?qs=cElEPTEzNSZpc01ncj1

U.S. Department of Commerce, Seafood Inspection Services. Seafood inspection program.

Retrieved from http://www.seafood.nmfs.noaa.gov/

http://www.nfsmi.org/Templates/TemplateDefault.aspx?qs=cElEPTEzNSZpc01ncj1�

http://www.seafood.nmfs.noaa.gov/�



Pretest/Posttest Multiple Choice Questions (Answers)

1. The company that purchases the product from the manufacturers and sells and delivers to the customer is the

a. Broker b. Buying Group c. Distributor d. Grower

2. The government agency that prohibits manufacturers from misbranding food or allowing adulterated foods is the

a. FDA b. USDA c. U.S. Department of Commerce d. U.S. Customs Service

3. Conditions for noncompetitive negotiation requires a. It must be USDA authorized b. One vendor may be used in case of emergency as defined by USDA c. The product being purchased must be a “one source” item and documented as

such d. All of the above

4. Products identified on the bid with the manufacturer’s name, code number, and establishment number are called

a. Distributor’s Choice b. Manufacturer’s Brands c. Pre-Approved Brands d. Private Label

5. Once the base number of cases to maintain in inventory is established, add _____to that base for a standard stock level.

a. 10% b. 25% c. 50% d. 75%

Answers: 1 (c), 2 (a), 3 (d), 4 (b), 5 (c)

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