https://youtube.com/watch?v=vfdy7F-vAjk

Welcome to the Informal Purchase Methods for
Community Nutrition Programs. This Webinar is for agencies participating
in the Child and Adult Care Food Program, which we will refer to as the CACFP, and the
Summer Food Service Program, which we will refer to as the SFSP. I am Laurie Pennings. Presenting with me today is Courtney Hardoin. We developed this Webinar because training
agencies on the procurement regulations is a top priority of the Nutrition Services Division
or NSD. In order to be successful, all agencies must
ensure they understand and are compliant with the different procurement methods. The purpose of this Webinar is to describe
the requirements of the two informal purchase methods and determine when to use these methods. In December 2014, the federal government issued
Title 2, Code of Federal Regulations, Part 200- Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards. The NSD refers to this document as the Uniform
Grant Guidance, because it consolidates eight older regulatory sections into one document
that covers all administrative requirements, cost principles, and audit requirements for
all federal awards. The guidance in these regulations pertains
to all agencies that receive federal awards or funds, not just agencies participating
in the child care or summer programs.

The procurement standards are covered in sections
200.318‒200.326. Before we discuss the different informal purchase
methods it's important to point out that in the federal regulations, 2 CFR, Part 200.318(d),
it includes the requirement that agencies make an appropriate analysis to determine
the most economical approach. This means agencies should consider all purchase
methods even if they are not required based upon the purchase threshold. Let's look at the definition in the Miriam
Webster dictionary for the term economical. It states that economical means:
– Marked by careful, efficient, and prudent use of resources
– Operating with little waste or at a savings, for example, having an economical car
The point to remember is even though a procurement method, such as the micropurchase method,
may be allowable based on the dollar amount of the single purchase transaction, agencies
should always consider whether using that method is the most economical approach. We will return to this concept later in the
Webinar. Courtney, what are the two types of informal
purchase methods? The two types of informal purchase methods
are micropurchases and small purchases. Let's get started with Part One: The Micropurchase
Method. Courtney, what is a micropurchase? Laurie, agencies may not be familiar with
this term because it's new to federal regulations.

It pertains to single purchase transactions
equal to or below the micropurchase threshold which is currently set at $3,500. Agencies should be aware that this dollar
amount changes from time to time. It is determined by Federal Acquisition Regulation
Part 2, Section 101. Agencies should also keep in mind that the
micropurchase threshold may be even lower than the federal threshold of $3500 depending
on local rules or laws. Courtney, you stated a micropurchase is a
single purchase transaction that is equal to or below $3,500. Can you give me some examples of single purchase
transactions? A single purchase transaction has one receipt
or contract.

Here are two examples of single purchase transactions:
– A single trip to a kitchen supply store to purchase cooking utensils. – A one-year contract for vended meals
Courtney, in the two examples of single purchase transactions, which one of those would be
a micropurchase? A single trip to the kitchen supply store
with a receipt for $45 or a one-year vended meal contract totaling $45,000? Since a micro-purchase is a single purchase
transaction equal to or less than $3,500, the receipt showing $45 would be considered
a micro-purchase. The one year contract is over the micropurchase
threshold of $3,500 so it would not be considered a micropurchase. We will discuss the small purchase method
later in this Webinar.

Can you give me some more examples of micropurchases? Other examples include purchasing paper from
an office supply store, purchasing new plastic cups, plates, or serving utensils. And if an agency's dishwasher breaks, they
may decide to pay someone to repair it or purchase a new one. In these cases, the cost is likely to be below
the threshold. These are all examples of micropurchases. You didn't mention groceries as an example
of a micropurchase. Why not? Would shopping for groceries fall under the
micropurchase method if the receipt was less than $3,500? Technically, yes. A trip to the grocery store would be a single
purchase transaction. However, remember, we stated that agencies
should make an analysis to determine the most economical approach for purchases. If you are going to make ongoing routine purchases
that add up to a significant amount of money by the end of the year, agencies should consider
whether there are alternative purchase methods to purchasing groceries that might make more
sense.

Here are some questions for you to consider:
– Can you get better prices by shopping around and choosing the store with the lowest overall prices? – Can you obtain price quotes for a contract with a distributor for some of the food items you need? Let's talk more about the micropurchase method
and then come back to this thought. So now that we know that a micropurchase is
a single purchase transaction equal to or less than the micropurchase threshold, what
else do agencies need to know? First, they should know that price quotes
are not required for micropurchases. Correct, as long as two conditions are met. What are the two conditions? First, the agency's purchasing agent should
consider the price they are paying to be reasonable.

Remember, agencies should focus on making
economical purchases. What's the second condition of a micropurchase? The regulations state that to the extent practicable,
meaning reasonable, agencies must spread their micropurchases equitably among qualified suppliers. Spread their micropurchases equitably among
qualified suppliers? Does that mean they need to shop at different
stores? Yes. Let's say an agency always purchases paper
from an office supply store down the street even though there are other office supply
stores in the area. The regulations require, if practicable, that
agencies shop at different stores when following the micropurchase method. Rotating stores allows multiple vendors to
benefit from federal dollars coming into their community. This is what is meant by distributing micropurchases
equitably among qualified suppliers. Agencies may be asked to provide a list of
stores where micropurchases were made and document how much was spent during the program
year at each of the stores. The example on the slide shows the agency
shopped at three different office supply stores.

Documentation of total expenditures at each
store for the entire year showed that the agency spread their purchases equitably among
qualified suppliers. If documentation showed that only $200 was
spent at office supply store A and $2,000 was spent at office supply store B, the agency
would not be compliant with the micropurchase method because purchases were not equitably
spread among qualified suppliers. So, it isn't enough just to shop at different
stores? Agencies must ensure they spend the same amount
of money at each store during the program year? Yes. This will be a big change for agencies that
are used to shopping at only one store. Some agencies have asked what they should
do if they are located in a rural area and there is only one store within a reasonable
distance.

That's a common question. The regulations state ". ..to the extent practicable, spread purchases
equitably among qualified suppliers." If there are no other qualified suppliers
within a reasonable distance, then considering the cost of gas and increased labor hours,
it would not be practicable to drive a long distance in order to spread purchases equitably
among qualified suppliers. If your agency does determine that it's not
practicable to shop at different stores, the reason that it's not practicable should be
included in your written procedures for the micropurchase method.

Please remember that your procurement procedures
must be fair and reasonable. If another qualified supplier is just a few
miles away but you do not shop there, you will not be in compliance with the micropurchase
method of procurement. Let's talk about shopping for groceries again. Many agencies tell us they prefer to shop
at a specific store because it has the lowest prices. First, it's always preferable to shop at a
store that has the lowest prices. However, because the micropurchase method
requires that you consider prices to be reasonable and to spread your purchases equitably among
qualified suppliers, you would no longer be following the micropurchase method if you
shopped at only one store because of lower prices. This means even if your receipt is less than
$3,500 it would not be considered a micropurchase because when prices are considered, you are
following the small purchase method.

Let's discuss the small purchase method now. Part Two: The small purchase method. You now know that the micropurchase threshold
is $3,500 therefore single purchase transactions equal to or less than $3,500 are considered
a micropurchase unless you choose to follow the small purchase method. Agencies must follow the small purchase method
when their single purchase transaction falls below the small purchase threshold. What is the dollar amount of the small purchase
threshold Laurie? The small purchase threshold depends on the
type of agency making the purchase. There are three main small purchase thresholds:
the federal threshold, the state threshold, and the local threshold. Agencies must identify which threshold pertains
to their agency. Let's review each one separately. The federal threshold pertains to all agencies
that do not have lower state or local thresholds. Typically, the federal threshold pertains
to private, nonprofit and for-profit agencies. As of the date of this Webinar, it is set
at $150,000. To make sure the dollar amount has not changed,
agencies can check the Federal Acquisition Regulation, Part 2, which can be located on
the Acquisition.Gov Web page at the Web address listed on this slide.

Does this mean if I'm a nonprofit agency and
I have a vending contract valued at or below $150,000 I can follow the small purchase method? Yes. If a private nonprofit agency has a contract
for over $150,000, they must follow the formal purchase method. We recommend they watch the Formal Purchase
Methods Webinar in addition to this Webinar. School districts and county offices of education,
must comply with the CDE small purchase threshold.

This threshold changes each calendar year
based upon inflation. In January 2017, it was set at $88,300. After January 1, 2018, agencies that must
adhere to the CDE's small purchase threshold should check the Web link on this slide for
the current threshold. Some agencies must comply with local small
purchase thresholds that are set by either local governments or by their own agency. Agencies must always use the most restrictive
applicable small purchase threshold. Now that we know when agencies are required
to follow the small purchase method, what are the requirements? First, agencies are required to develop specifications
for the goods or services they need. Second, they are required to contact an adequate
number of qualified sources to obtain price quotes. How many quotes are required? The regulations state that price or rate quotes
must be obtained from an adequate number of qualified sources. The NSD interprets this to mean that in areas
with an abundant number of qualified sources, an agency would get more quotes than in an
area with only two qualified sources. The agency should consider the number of qualified
sources when determining the number of quotes to obtain.

How are price quotes to be obtained? The NSD recommends that agencies obtain quotes
in writing from vendors. This reduces the chance of a dispute or the
potential for an agency to participate in unethical behavior. It is allowable to contact vendors by phone,
however documentation received over the phone must be written down and maintained. What if an agency can only find one qualified
source? The regulations allow what's referred to as
noncompetitive procurement under four criteria. The four criteria are, number one, after solicitation,
competition is deemed inadequate. This means an agency has done a proper job
soliciting for goods or services and they only received one quote. The second criteria is that goods or services
are only available from one source. The third criteria is there is an urgent or
public need that will not permit a delay and the fourth criteria is the state agency approves
after written request. Agencies are strongly encouraged to contact
their program specialist if they have a noncompetitive or sole source situation. Failure to adequately follow procurement guidelines
and requirements related to sole source or noncompetitive procurement may result in financial
findings against an agency. What else are agencies required to do when
following the small purchase method? Agencies must ensure that the specifications
they provide to prospective vendors are the same.

This ensures they are comparing apples to
apples and are conducting business in a fair and equitable manner. They should choose the vendor with the lowest
price and keep all procurement records as documentation for administrative reviews or
ARs. School districts must comply with the State
of California Public Contract Code, Section 20116 which requires them to annually publish
a notice inviting contractors to register to be notified of future informal bidding
projects. Whenever the school district seeks a contractor
or vendor for a small purchase, they must notify the contractors or vendors who are
registered. This requirement pertains only to school districts. Do you have any tips for agencies that use the small purchase method for obtaining vended meals? Yes. They must be sure to provide sufficient detail
in their specifications to ensure they are requesting meals that meet the specific child
nutrition program meal pattern.

It's a good idea to request a variety of fresh
fruits and vegetables, and whole grains. They should also document the other required
terms and conditions of the contract. If desired, agencies could also require that
the vendors provide a sample of their menu items for the children to taste. How would a taste test be included in a competitive
solicitation where the vendor with the lowest price must be selected? Agencies could require that the vendors they
contact who are interested in submitting a quote provide a sample of their meals for
the children to taste. The agency could set a threshold, for example,
if less than 85 percent of the children do not find the food acceptable, then the vendor
would not be considered responsible which means capable of meeting the terms and conditions
of the contract.

The agency could then request quotes only
from the vendors who passed the taste test. This will help to ensure that the agency are
getting meals that the children like to eat. If an agency does include a taste test as
part of their solicitation, they should be sure all vendors contacted are given the same
detailed information as to how the taste test will be conducted, how it will be evaluated,
when and where to bring the specific items, and a contact name and phone number. Laurie, what is meant by awarding contracts
to responsive and responsible vendors? Agencies must award contracts to responsive
and responsible vendors. Responsive means that the vendor is willing
to meet all the terms and conditions specified in the solicitation. A responsible vendor means that the vendor
is capable of meeting the terms and conditions in the solicitation. Using the example of the taste test, if the
vendor fails to achieve the threshold the agency has set for passing the taste test,
they would not be considered a responsible vendor.

In this case, their price quote would not
be considered. What are other ways to assess whether a vendor
is responsible? Agencies should consider asking a vendor to
provide references from other agencies of similar size to assess whether they are responsible. It's up to each agency to determine how to
assess whether vendors are responsible. An agency should also consider whether the
vendor has the financial and technical resources to meet your needs.

Once a vendor is selected, can the vendor
develop a contract for the agency to sign? No. Contractors may not develop their own contracts
when participating in either the CACFP or the SFSP Agencies must use the CDE Standard Food Service
Vending Agreement found in the Download Forms section of the Child Nutrition Information
and Payment System, better known as CNIPS. A copy of the contract shall be submitted
to the CDE prior to beginning Program operations under the contract. If an agency chooses to add additional provisions
to the Standard Food Service Vending Agreement, it must be approved by the CDE. Public agencies may, with CDE approval, use
their customary form of contract if it incorporates Program provisions. Can you give an example of how an agency could
follow the small purchase method when buying groceries at a store? Yes.

Here's one way an agency could compare prices
and choose the store with the lowest prices. First, they would identify specific quantities
of the top ten items they purchase. They should be specific in order to compare
apples to apples. The next step would be to obtain documentation
of prices from different stores in the area. After adding up the prices for all items in
a specific quantity, they should be able to determine which store has the lowest prices
overall. What if an agency doesn't have storage space
for the large quantities of food that are available from a wholesale store? Then it may not be practicable to shop there.

Sometimes agencies purchase specific foods
from a wholesale store and other foods needed in smaller quantities from a retail grocery
store. In this case, they should justify which retail
grocery store has the lowest prices. Remember documentation is required. How would they obtain documentation for prices? Agencies can look for prices online, get quotes
over the phone, or physically go to the store. If they obtain quotes over the phone, they
must write the prices down. If they physically go to the store, they should
take a picture of the prices. This documentation must be retained to show
evidence of obtaining price quotes and selecting the vendor with the lowest price.

If they obtain prices online, they should
print and retain the prices as proof of costs. How often would they need to obtain quotes? The federal regulations do not define the
frequency for conducting this type of analysis. A best practice is to obtain quotes annually. Agencies might also consider developing specifications
and obtaining price quotes from food distributors. It may be cost effective to establish a contract
with a distributor who delivers food. This will depend on the size of your agency. Is the small purchase method required for
purchasing groceries? Technically, no. A single purchase transaction that is equal
to or less than $3,500 could be considered a micropurchase. However, as mentioned before, consideration
should be given to the most economical approach. Whenever there are routine, ongoing purchases,
the small purchase method will likely result in lower expenditures. It is up to each agency to justify why the
micropurchase method is the best approach for items purchased using this method.

Is there anything agencies should
know about purchasing equipment? Yes. First, let's define what equipment is. Equipment is any item of nonexpendable personal
property with a useful life of more than one year and a per unit acquisition cost of $5,000
or more. Nonexpendable personal property can be tangible,
having physical existence, such as equipment, or intangible, having no physical existence,
such as patents, inventions, and copyrights. Would a refrigerator that costs $2500 be considered
equipment? No, all items less than $5,000 are considered
supplies and should be included under the line item for supplies in the program budget. The total dollar amount for supplies is approved
by your program analyst prior to starting your program year. How is approval for equipment different than
supplies? In order to purchase equipment, agencies must
contact their program specialist and obtain approval in writing for this specific purchase
before making the purchase. If they do not obtain prior written approval,
they could receive fiscal findings during an administrative review.

What if the agency is participating in one
of the school nutrition programs? I'm glad you brought that up! School nutrition program operators do not
need to obtain specific prior written approval, if the equipment is listed on the U.S. Department
of Agriculture (USDA) Capital Expenditure Approved List. This list is available on the CDE School Nutrition
Program Cafeteria Funds Guidance Web page at http://www.cde.ca.gov/ls/nu/sn/cafefundguide.asp
So a school that is operating either the CACFP At-risk afterschool supper program or the
SFSP would not need specific prior written approval to purchase equipment over $5,000
if the item was on the USDA Capitol Expenditure Approved List, but a Boys and Girls Club operating
the CACFP At-risk afterschool supper program or the SFSP would need to obtain specific
prior written approval because they are not a school nutrition program operator. Yes, you got it! It's time for a quiz. An agency needs to purchase three new gas
ranges for three kitchen sites and the cost for each one is about $2,000.How should they
make this purchase? Should they, A.

Make a micropurchase by purchasing each
gas range separately, so their invoices are below the micropurchase threshold
B. Follow the small purchase method and develop specifications, obtain price quotes, and choose
the vendor with the lowest price item In this situation, the cost of three gas ranges
is about $6,000, which is over the micropurchase threshold. Agencies cannot arbitrarily separate their
purchases so they can fall below the micropurchase threshold to avoid getting price quotes. Therefore, the agency would need to follow
the small purchase method. This concludes the Informal Purchase Methods
for Community Nutrition Programs Webinar. For additional procurement information, visit
the CDE Procurement in the Child Nutrition Program Web page at the link on this slide. There are also additional procurement Webinars
for Community Nutrition Programs on the Procurement Trainings for Community Nutrition Programs
Web page at the link on this slide. If you have questions after reviewing the
NSD Procurement Web page and the Webinars, please contact your program specialist. To find your CACFP specialist, type in the
link listed on this slide. To contact a SFSP specialist, call the NSD
at either of the phones numbers or e-mail address shown on this slide.

Specialists are here to assist agencies with
ensuring they are meeting the federal procurement standards. You can print a certificate of completion
for this Webinar by accessing the link on your slide. If you have difficulty printing your certificate,
please contact your program specialist. Keep this certificate on file as you may be
asked to show it during an AR. Thank you for listening in today!.

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