As you may know the procurement standards for entitlement programs operated by State and local governments have been moved to 7 CFR Part 3016, while procurement standards for institutions of higher education, hospitals, and other nonprofit organizations are now in 7 CFR Part 30 19.  Since the regulatory authority has been changed, some policy memorandums are more difficult to understand.  One such memorandum is SP 00-3, dated November 2, 1999, entitled Beverage and Snack Agreements.  The subject memorandum supercedes SP 00-3.

The following is a summary of the existing regulatory requirements as they pertain to exclusive beverage and snack contracts.  

In some cases the exclusive contracts do not involve nonprofit school food service account funds, in which case there are no Federal FNS procurement issues involved.  However, if any nonprofit school food service products are purchased via the exclusive contract, then all Federal procurement requirements must be met.  Reference 7 CFR 210.21; 7 CFR 3016 for State and local governments; and 7 CFR Part 3019 for institutions of higher education, hospitals, and other non profit organizations.

• Public school food authorities (LEAs) must follow State or local procurement codes which are equal or more stringent than the Federal Rules.  However, they are prohibited from using statutorily or administratively imposed in-State or local geographical preferences, except when procuring certain architectural or engineering services.  In addition any person that develops or drafts specification, statements of work, invitations for bids, requests for proposals, contract terms and conditions, or other documents for use by the bidder may compete for that contract.

• Non-governmental, not-for-profit organizations, including public and private universities, public and private hospitals, community action agencies, private schools, private residential institutions, and other charitable organizations must follow procedures which are not inconsistent with Federal Rules and outlined in 7 CFR Part 3019.

If nonprofit school food service products are included in the contract, any rebates, commissions, scholarship fund contributions, or any other payments back to LEA or LEA related organizations, must be reimbursed to the nonprofit school food service account on a prorated basis.  Reference 7 CFR 210.14 and OMB Circular A-87, Attachment A.

Since many of these contracts are multi-year, it should be noted that there is no Federal prohibition on multi-year contracts other than for food service management companies.  It is suggested; however, that school procurement officials consider the impact of multi-year contracts, as opposed to one year contracts, on beverage and snacks.  Long term contracts would appear to be more appropriate for nonperishable products and services, such as warehousing and equipment rental; however, as noted above, there is no Federal prohibition on these longer term contracts.