Transcription

Section 16aContract ManagementTexas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 1 of 33

Section 16a, Contract ManagementUpdate GuideAugust 16, 2021Updated Section 16a, Contract Management to correct minor typos.Clarified information on the following topics:August 12, 2020- Contract duration- DefinitionsCreated Section 16a, Contract Management and updated the Administrator'sReference Manual (ARM) sections references. Guidance for this new section wastaken from the Administrator’s Reference Manual (ARM), Section 17,Procurement.Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 2 of 33

Table of ContentsWritten Procurement Procedures Related to Contract Management . 7Program Integrity and Internal Controls. 7Responsibility for Contract Implementation. 8Definitions for This Section . 8Effective Management of Contracts and Agreements . 17Additional Purchase beyond the Quantity Expressed in the Solicitation and Contract . 17Material Change . 17Market Basket . 18Additional Purchase of Already Procured Items from Another Source . 18Off Contract Purchases . 18Bonding Requirements (if required) . 18Buy American . 18Purchased Made on Behalf of the CE . 19Consultant Contracts . 19Contingency Approval . 19Cooperative Purchasing . 19Cooperative Fee . 19Credits, Discounts, and Rebates and USDA Foods Values . 20Audit Clause. 20Inability of Contractor to Meet Terms and Conditions for Crediting . 20Duration of Contract . 21Consolidation . 21Contract Duration Period . 21Renewal Options. 21Food Product Documentation. 21Food Safety . 22Franchise Agreements (If Applicable) . 22Invoicing and Payments . 23Modifications to the Cost of a Renewable Contract . 23Modifications to a Renewable Contract, Flexibility for Anticipated Changes . 23Anticipated Growth . 24Material Change . 24Piggybacking . 24Other Regulatory Requirements . 24Ownership of Equipment or Software . 24Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 3 of 33

Professional Certification and Professional Development (As Required). 24Specifications, Technical Requirements, and Terms and Conditions . 25Contract Disputes . 25Documentation . 25Procedures . 25Termination/Non-Renewal of a Contract . 26Future Contracts . 26Third-Party Contracts Procured on Behalf of the CE . 26Unallowable Contracts . 27USDA Foods . 27Contract Protests . 28Additional Resources . 28TDA Resources . 28Institute for Child Nutrition (ICN) . 29Other Websites . 29Records Retention . 29Third-Party Contracts . 30Duplicative Services . 30Compliance . 32Obligation of the Contracting Entity (CE) to Report Fraud, Bribery, and Gratuity Violations . 32Criminal Penalty . 33Fraud . 33Termination of the Permanent Agreement for Financial Fraud or Misuse of Funds. 33Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 4 of 33

Contact Information for theTexas Department of Agriculture (TDA), Food and NutritionWhen contacting TDA by phone, Contracting Entities (CEs) need to have their CE Identification Number (CE ID) (and site ID, ifapplicable). CEs should include their name and CE ID (and the site name and ID if applicable) in all communication or documentation.General Contact InformationPhysical AddressMailing Address1700 N. Congress, 11th Floor, Austin, TX 78701PO Box 12847, Austin, TX 78711-2847PhoneEmail Contact877-TEX-MEAL, (877) 839 [email protected](888) 203-6593Questions about Program ApplicationsWebsitewww.SquareMeals.orgQuestions about Program OperationChild & Adult Care Food [email protected] School Lunch Program, School Breakfast Program, &Special Milk [email protected] Summer [email protected] Food Service [email protected] Foods Community Operations (Child & Adult Care Food Program &Summer Food Service Program)[email protected] Operations (National School Lunch Program, SchoolBreakfast Program, & Special Milk s Eligibility List Management System (Texas ELMS)Questions about Program [email protected] for questions about- Breakfast [email protected] Fresh Initiative (Local Products)[email protected] Nutrition Program Requirement WaiversQuestions about Financial Issues-Gender ExceptionCapital Expenditures-Hiring Standards, CEs with Less Than 500 StudentsLunch MealtimePaid Lunch Equity (not currently available)RCCI Age/Grade Group Meal PatternSeamless Summer Operation (SSO) Age/GradeSummer MandateTechnology-Based [email protected], Including Sole Source and Emergency ture.govExcessive Balance l Breakfast MandateQuestions about USDA FoodsVending Machine to Dispense Reimbursable [email protected] for questions about- Milk Substitute NotificationUSDA Foods Carryover SDA Foods ne 22, 2020Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 5 of 33

Contract ManagementThe guidance in this section is intended to assist contracting entities (CEs) in (1) establishingeffective practices for managing contracts and agreements and (2) ensuring that all contractsand agreements are operated according to the applicable regulations and guidance.The guidance is this section applies to contracts that are procured on behalf of the CE.The guidance in this section applies to the following school nutrition programs (SNPs): National School Lunch Program(NSLP) Afterschool Care Program(ASCP) Fresh Fruit and VegetableProgram (FFVP) Seamless Summer Option(SSO) School Breakfast Program (SBP) Special Milk Program (SMP)The guidance in this section is intendedto be used with the procurement andfinancial guidance provided in thefollowing Administrator's ReferenceManual (ARM) sections: Section 14, USDA Foods Section 14a, USDA FoodsProcessors Section 15, Program Integrity Section 16, Financial System Section 17, Procurement Section 17a, ProcurementProcedures Section 17b, Buy AmericanInformation Box 1Additional Resources for ProcurementTexas Comptroller of Public AccountsThe website for the Texas Comptroller provides informationon state regulations that apply to state and localgovernmental entities. Available atwww.comptroller.texas.gov/Resources include the following: Model Purchasing Manual for Texas Cities andCounties 2010—information that applies to allgovernmental entities, including schools. ing/96-449 Model Purchasing Manual 11 10.pdfState of Texas Contract Management Guide—guidance and recommendations on improvingexisting contract management methods andpractices. Available s/contract-management-guide.phpTexas Education Agency (TEA)Financial Accountability System Resource Guideprovides detailed guidance of financial accountability,including Module 5, Purchasing, for local educationagencies and charter schools. Available atwww.tea.texas.gov/Finance and Grants/Financial Accountability/Financial Accountability System Resource Guide/United States Office of Management and Budget (OMB)2 Code of Federal Regulations, Part 200—Theseregulations provide detailed information on required federalprocurement process. Available atwww.fns.usda.gov/es/node/73141Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 6 of 33

Section 17c CooperativePurchasing Section 18, Food ServiceContracts Section 23, Food ProductDocumentation Section 26, Food Safety Section 27, ProfessionalStandards Section 30, Records RetentionWritten Procurement ProceduresRelated to Contract ManagementCEs are required to have writtenprocurement procedures that reflectapplicable local, state, and federalregulations that include, but are notlimited to, checks and balances thatprovide internal controls for all financialmatters including contract management.For detailed guidance on procurementprocedures, see the Administrator’sReference Manual (ARM), Section 17,Procurement Procedures.[NOTE: The requirement for written proceduresalso applies to agreements.]Program Integrity and InternalControlsThe procurement process is intended topromote program integrity and establishinternal controls.Program Integrity is defined as anorganized and structurally sound financialmanagement system that promotesprogram efficiency and prevents theinappropriate use of program funds.Contract management is a central factorin developing an effective financialmanagement system that providessafeguards to ensure the stewardship offederal money and reduce fraud andInformation Box 2Implementation of 2 Code of Federal Regulation (CFR) Part 200The updates to this section include the consolidated 2Code of Federal Regulation (CFR) Part 200 whichreplaced existing rules at 7 CFR Parts 3015, 3016, 3019,and 3052, and the following Office of Management andBudget (OMB) guidance documents; 2 CFR Part 220 (A21), A-50 (sections related to audits), 2 CFR Part 225 (A87), A-89, A-102, A-110, 2 CFR Part 230 (A-122), andA-133.2 CFR Part 200 primarily serves to consolidate theprevious regulations into one location as a convenienceand for clarity. For procurement, 2 CFR Part 200 clarifiesexisting regulation and adds one new flexibility—micropurchasing.[NOTE: 2 CFR Part 200 also applies to all financial andaccounting practices. Section 17, Procurement onlyaddresses issues related to procurement. Other finance andaccounting issues are addressed in Section 14, FinancialInformation Concerning School Nutrition Funds.]Conflicting Program RegulationsFor CEs operating Child Nutrition Programs (CNPs),there are federal, state, and local regulations that governthe actions of the CE. When there is a conflict betweenUSDA regulations and other regulations, the CE mustfollow USDA regulations for the use of CNP funds. Ifother applicable federal, state, or local regulations do notconflict with USDA regulations, the CE will follow themost restrictive other federal, state, or local regulations.All programs that receive federal funds are required tofollow 2 CFR Part 200 unless federal legislationsupersedes 2 CFR Part 200.Education Department General Administrative Regulations(EDGAR)CEs receiving funds through the United StatesDepartment of Education are required to follow theregulations described in the Education DepartmentGeneral Administrative Regulations (EDGAR) forthose funds, which incorporates 2 CFR Part 200.However, Child Nutrition Programs (CNPs) are requiredto follow USDA regulations for financial management,including procurement. While there are regulations inEDGAR that conflict with USDA regulations, in mostsituations, CEs will find the regulations to be compatible.However, if there is a regulatory conflict, CEs arerequired to follow the USDA regulations for all CNPfunds (income, allowable and unallowable costs, andprocurement).Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 7 of 33

improper payments by the use of internal controls. Administrator's Reference Manual (ARM),Section 15, Program Integrity provides detailed guidance on program integrity.Responsibility for Contract ImplementationThe CE is responsible for ensuring that a contract is compliant with all programregulations. Ensuring compliance is a central component of managing contracts even if afood service management company (FSMC) operates the program on behalf of the CE.Definitions for This SectionThe nature of financial processes fosters the use of terms and vocabulary that are morecommonly used by accountants than by school nutrition staff. For School Nutrition Programs(SNPs), the following financial and procurement terms are used:Acting on Behalfof CEEntity or person who has been given the responsibility to act for the CE.AgentPerson or business that is procured to act on behalf of the CE. This includes procuring onbehalf of the CE.AggregatePurchase AmountThe total cost of all products and services in a single procurement transaction.Agreement(for SchoolNutrition Programs)Written legal document summarizing contractual obligations between two or moreentities. This includes intergovernmental and interlocal agreement.AllocableAssigning a cost, or group of costs, to one or more cost objectives, in reasonable andrealistic proportion to the benefit provided or other equitable relationship—the cost meetsone of the following principles:- is incurred specifically for the award/program or- benefits both the award/program and necessary work and can be distributed inreasonable proportion to the benefits received or- is necessary to the overall operation of the organization, although a directrelationship to any particular cost objective cannot be shown.AllowableDirect or indirect costs that may be paid by SNP funds.ApprovedSupplier ListList of suppliers or potential contractors who have demonstrated the ability to performsuccessfully under the terms and conditions of a proposed procurement, considerationbeing given to contractor integrity, compliance with applicable policy or regulations,record of past performance, and financial and technical resources.Arms-LengthTransactionTransaction in which the parties are dealing from equal bargaining positions—neitherparty is subject to the other’s control or dominant influence, and the transaction is treatedwith fairness, integrity, and legality.Less than Arms-Length TransactionA less than arms-length transaction occurs when a person responsible for makinga purchase and appears to have a stake in the outcome is able to control orsubstantially influence the actions of others. This may include agreements betweendivisions of an organization; organizations under common control throughcommon officers, directors, or members; and an organization and a director oremployee of the organization and his or her immediate family.Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 8 of 33

AuditIndependent examination of accounting and financial records for accuracy, efficiency, andconsistency. This is also called the annual audit or single audit.Audit ReportFinal summary of audit findings provided by a financial auditor.Audit CorrectiveAction PlanPlan in which the CE describes the strategies or actions the CE will adopt to address eachfinding reported in the audit report.Audit SummarySchedule or WorkPlanDocument that contains a cumulative list of audit findings by year and explanations of thestrategies and actions the CE plans to take or has taken to resolve each audit finding. Thissummary allows the CE, auditor, or TDA staff member to review the actions planned ortaken from year to year to maintain an accurate, efficient, and consistent accounting andfinancial system.Bid GuaranteeGuaranteed percentage of bid price provided by the offeror at the time the offer issubmitted. The CE must return all bid guarantees to all unsuccessful offerors when thecontract is awarded and to the winning offeror as soon as the contract is signed.BondInsurance agreement pledging surety for financial loss caused in connection with thecontract. For school nutrition programs, if a loss occurs in connection with a contractrelated to program operations, the loss will be covered to the extent agreed upon in thebond.Breach of EthicsAttempt to realize personal gain through public employment with a CE by any conductinconsistent with the proper discharge of the employee’s duties.BrokersIndependent sales agents who negotiate sales for manufacturers by working with fooddistributors and/or school nutrition operations.Buy AmericanRequirement for schools to purchase, to the maximum extent practicable, domesticcommodities, and products.A domestic commodity or product means an agricultural commodity that is grown in the UnitedStates and processed in the United States or that is processed in the United States substantiallyusing agricultural commodities that are produced in the United States.Capital AssetsLand, buildings (facilities), and equipment that have a useful life of more than one yearwhich are capitalized in accordance with Generally Accepted Accounting Principles(GAAP).CapitalExpendituresDirect cost expenses to acquire capital assets or to make additions, improvements,modifications, replacements, reinstallations, renovations, or alternations to capital assetsto be used for general purposes for multiple years and which materially increase the valueor useful life of the asset.1CE Employee(Specific to ProgramIntegrity)Charge Period1Term used in this section to represent a CE employee or official; family member of CEemployee or official; or business partner of a CE employee or official.Span of time during which a cost is paid. This payment process includes spreadingpayments over a period of weeks or months or establishing milestones that are linked topayments.TDA must approve capital expenditures before a CE makes a capital expenditure purchase.Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 9 of 33

Code of ConductSet of written standards the CE must develop that outline the responsibilities of, or properpractices for, an individual or organization and which governs the following:1. Performance of the officers, employees, or agents engaged in contract awards andadministration when the contract is funded in whole or in part by Food andNutrition Service (FNS) program funds.2. Methods of procurement, including the requirement that the CE perform a cost orprice analysis for every procurement (including contract modifications) anddetermination of which contract clauses and certifications are required in the CE’scontracts.Cognizant AgencyRelated to IndirectCostsAgency that has primary responsibility for negotiating the indirect cost methodologies fornon-federal entities.Conflict of InterestAny action that allows a person to benefit at the expense of the public interest or theexpense of an employer. A conflict of interest may be a real or apparent conflict of interest.ContractFormal, legally enforceable agreement (terms and conditions) between a buyer (the CE)and a seller (contractor) that clearly and accurately describes the products and/or servicesto be delivered or performed and sets forth the method and the compensation thecontractor receives when products and/or services are provided.ConsultantConsultant that provides temporary support to the CE in areas where the CE lacks thenecessary resources, skills, and/or abilities in order to assist the CE in gaining thenecessary resources, skills, and/or abilities to operate an effective and compliant program.CooperativePurchasingGroup of entities who join together to purchase products and/or services with theintention of reducing costs and improving the quality of products and/or services availableto members of a group. In this reference, a purchasing cooperative consists of a group ofCEs.Cost AnalysisReview and evaluation of each element of cost to determine reasonableness, allocability,and allowability for products and/or services to procured. A cost analysis will include thetotal projected cost for the products and/or services to be procured.Cost IndexTool designed to show the impact of an economic measure on the price of purchasing aspecific type of item. TDA has approved the use of the Consumer Price Index (CPI) FoodAway from Home for this purpose.Cost ObjectiveProgram function or activity for which cost data and for which specification is made toaccumulate and measure the cost of processes, products, jobs, or other expenses.Cost PlusPercentage of CostMethod of pricing where the contract or agreement creates a pricing structure that chargesthe cost of the product or service plus a percentage of the cost. This pricing structure is notallowable for any purchase under USDA regulations. Any costs charged from this type ofpricing structure are unallowable costs to a Child Nutrition Program (CNP).Reimbursable contract that is a formal, legally enforceable contract that reimburses thecontractor for costs incurred under the contract but does not provide for any otherpayment to the contractor with a fixed fee or with a cost-reimbursement fee.CostReimbursableContract[NOTE: The fixed fee associated with these types of contracts may be called management fees oradministrative fees.]In a cost-reimbursable contract, allowable costs will be paid from the nonprofit schoolnutrition account to the contractor net of all discounts, rebates, and other applicablecredits accruing to or received by the contractor. In a cost-reimbursable contract, the fixedprice (fee) includes the contractor’s direct and indirect administrative costs and profitallocable to the contract.Texas Department of Agriculture Food and Nutrition DivisionSection 16a, Contract Management August 16, 2021 Page 10 of 33

DebarmentAction taken by a debarring official to exclude a person from participating in coveredtransactions.2 A person so excluded is debarred, that is, unable to participate.Direct CostExpenses that can be identified specifically with a particular cost objective used to meet aspecific program goal or goals.DistributorCommercial food company that purchases, receives, and/or stores commercial foodproducts and then sells, delivers, and bills the recipient agency for goods and/or servicesprovided.Drop DeliveryDelivery to one location within the CE, such as a central warehouse.Economies ofScalePurchase of large quantities of a product and/or service in order to obtain a better price.Escalator/Deescalator Clause orMarket-basedPricingPredetermined provisions in a contract stipulating specific conditions for an increase ordecrease in price.Equipment(Property)EthicsExcessive FundBalance(Net CashResources)Exclusive Contract(Including ExclusiveBeverage Contracts)Expenditures(Costs)Firm Fixed-PriceContract(Also Called FirmPrice Contract)23Items which have been purchased and are nonexpendable; items have a useful life of morethan one year. Equipment purchases of 5, 000 or more are capital expenses and requireprior approval.3Principles of conduct governing and guiding decisions for an individual or a group in theirpersonal and professional lives. School nutrition professionals have a responsibility to actethically in accordance with all federal, state, and local guidelines.Fund balance that exceeds three months of operating expenses. For NSLP and SBP anexcessive fund balance refers to net cash resources.[NOTE: USDA guidance and regulations use the term excessive fund balance for thiscircumstance. The regulation is actually referring to excessive net cash resources, the amount offunds the SNP account has available to spend at the end of the year— the total revenue less thetotal liabilities (expenditures). The Government Accounting Standards Board (GASB) describesthis as spendable funds. Items such as inventories are not spe

Texas Department of Agriculture Food and Nutrition Division Section 16a, Contract Management August 16, 2021 Page 2 of 33 Section 16a, Contract Management Update Guide August 16, 2021 Updated Section 16a, Contract Management to correct minor typos. Clarified information on the following topics: - Contract duration - Definitions