Food Service Management Company (FSMC)
Below covers important information and regulatory updates concerning the use of a food service management company in public and non-public schools and institutions participating in the Child Nutrition Programs. Please read it in its entirety.
Please Note: All contracts/extensions are between a School Food Authority (SFA) and a Food Service Management Company (FSMC) and are subject to review and approval by New York State Education Department (NYSED) in accordance with applicable federal and state law. While this guidance provides information on the requirements of federal and State statutes and regulations, the document should not be considered all-inclusive. The SFA should carefully read each contract item in the prototype to ensure both the SFA’s needs and local procurement requirements are being met and all blanks provided in the prototype have been accurately completed. This guidance is not intended to be a manual on the law of contracts or constitute legal advice nor is it intended to supplant the actual terms of the contract. Always consult your legal counsel for legal advice concerning contracts. The SFA’s attorney should be involved in the development of the contract so that required contract terms are included in the contract and the terms of the contract are properly drafted to achieve the SFAs desired outcomes and to ensure that there are no conflicting terms.
New for 2017-2018 - We will no longer be utilizing the Type IV Contract (Jails and RCCI’S). Jails and RCCI’s that are going out to bid for the 2017-2018 school year will now use the Type II Contract but will have required supplemental pages that will need to be inserted into the prototype contract. Please email firstname.lastname@example.org to request the supplemental pages. Any SFAs that are in a current TYPE IV contract and are able to extend the contract may still do so.
Every SFA should be annually reviewing its FSMC contract with no expectation by either party to renew the contract. USDA has issued guidance on how to determine if there will be a “material change” to an existing FSMC Contract. SFAs must use the following criteria to determine if the changes constitute a material change to the contract:
- If the cost of the contract were increased or decreased, would it have caused bidders to bid differently if the prospective change had existed at the time of bidding?
- Would the prospective change materially affect the scope of services, types of food products, volume of food products, etc., in both the solicitation document and resulting contract? For example, the Final Rule requires schools to serve whole grain-rich products, specific varieties of vegetables and increased amounts of fruit, etc., which already may be included in current contracts.
If costs to meet the new standards will result in increased costs beyond what is stipulated in the current contract the SFA must go out to bid. The SFA cannot pay the FSMC for “additional costs”.
Both the SFA and the FSMC must review their current contract. SFAs and FSMCs should be mindful of the increase of the bid price against the Consumer Price Index for All Urban Consumers (CPI-U) when determining if there is a material change to the contract. The current CPI-U can be found at https://www.bls.gov/regions/new-york-new-jersey/news-release/ConsumerPriceIndex_NewYorkArea.htm
The United States Department of Agriculture (USDA) has revised regulations to rectify audit deficiencies in SFAs that use a FSMC. The regulations clarify the SFA’s responsibility to follow proper procurement procedures, limit the use of the nonprofit school food service funds to costs resulting from proper procurement and contracts and detail the State Agency’s responsibility to review and approve SFA procurement procedures and contracts.
If the board of education, staff or students are not satisfied with the current FSMC, or if the SFA wants to make material changes to the food service operation to fulfill the recommendations of their wellness plan, the contract must be re-bid using the NYSED’s revised bid specifications and contract for 2017-2018.
It is required that all public schools, non-public schools, residential child care institutions and jails participating in the National School Lunch Program (NSLP), School Breakfast Program (SBP) and/or Special Milk Program (SMP) that use the services of a FSMC, caterer, or consultant preparing meals on site, on a daily basis and running their food service operation in whole or in part, must competitively bid for services by complying with the following:
- SFAs must use the 2017-2018 bid specification and agreement provided by NYSED. Failure to use the prototype contract will result in disapproval of the contract and the SFA having to rebid. Any changes to the prototype contract must be approved in writing by NYSED prior to letting bids. Therefore:
- Complete NYSED Prototype Pre-bid FSMC Contracts are to be emailed to email@example.com 30 days prior to letting bids.
- The NYSED Child Nutrition Program (CN) Office must approve all FSMC contracts or extensions for SFAs to receive reimbursement for meals, snacks and milk served to students.
- Any changes, additions and/or deletions (also referred to as riders, addenda or addendum) to the State Agency prototype contract must be submitted for review and approved prior to letting bids as required by the revised regulations and included in the designated portion of each contract type. Failure to do so will result in the SFA being required to properly rebid the contract.
- Schedules A-I must contain complete information and be included in with the prototype pre-bid contract for review and approval by the NYSED CN Office. The SFA will be notified by email, once the pre-bid has been approved.
- Altered specifications and/or contract are to be emailed in to NYSED CN Office for approval 30 days prior to letting bids.
- After bids have been let, the contract term is for one year and may be extended each year, for an additional four years.
- An increase to the bid price is limited to no more than the increase in the Consumer Price Index for Urban Consumers (CPI-U) for the New York-Northeastern New Jersey area. (Please visit https://www.bls.gov/regions/new-york-new-jersey/news-release/ConsumerPriceIndex_NewYorkArea.htm for the appropriate extension percentage)
- Going out to bid prior to submitting the pre-bid for approval to our office may result in withholding reimbursement and/or potential loss of funds.
- Significantly changing menu items offered to students that result in higher costs to the FSMC are material changes to the food service operation and will require re-bidding of the current contract.
- Consult your school attorney to determine what other areas are considered material changes to the contract.
- SFAs must follow the bidding procedures outlined in New York State General Municipal Law §103. Specifically:
- Advertise the bid in the official school district’s newspaper or one having general circulation in that locality. The SFA is required to submit a notarized affidavit of publication from the newspaper that advertised the bid as proof of publication. Failure to provide the affidavit of publication with the submission of the signed contract will cause the contract to be disapproved and will require re-bidding of the contract.
- At least five days shall elapse between the first publication of such advertisement and the date so specified (in the advertisement) for the opening and reading of bids. It is the SFA’s responsibility to ensure that the bid notice was published and enough time elapsed between the first advertisement and the date bids are opened. It is recommended that SFAs allow two weeks before advertised bids are opened and read, thereby providing ample time for bidders to visit the sites where work will be performed.
- Visits to the sites where work will be performed must be scheduled after the bid has been advertised. (The requirements of the bid specification and agreement must be known to all potential bidders at the time the work site is examined in order to provide a level playing field for all potential bidders, including the incumbent FSMC. The goal of competitive bidding is to provide a level playing field for all potential bidders. Creating an advantage for one potential bidder is inappropriate and unallowable). Failure to follow this procedure will result in the disapproval of the contract and will require the SFA to properly re-bid the contract.
- The SFA must include with their contract submission a copy of the board meeting minutes selecting the winner of the bid if the lowest bidder is not chosen.
- Bid documents and extensions must be approved by the CN office prior to the start of the contract/extension. The SFA must ensure that the final contract or extensions are submitted to CN at least 30 days prior to the start of the contract. Failure to adhere to these due dates may result in reimbursement hold and/or possible loss of reimbursement.
Failure to adhere to these due dates could result in reimbursement holds and/or possible loss of reimbursement.
If you have any questions, please contact Jamie McMillian in Child Nutrition Program Administration at (518) 473-8781.
2017-2018 Additional Information
- Guidelines for Submitting a Successful Contract
- Guidelines for Submitting a Successful Extension
- Contract and Extension Information
- Summary of SFA and/or FSMC Ongoing Responsibilities
- The Contract
- Contract Review Process
- Contract Type II
- Calculating Vendor Payment under Type II contract
- Contract Type III
- Important Telephone Numbers and Web Addresses
- Important Regulatory References
- Management Company Listed (The New York State Education Department does not endorse any of the companies listed.)