CONTRACTING
WITH
A FOOD SERVICE
MANAGEMENT COMPANY
4/13/2015
January 2014
1
OBJECTIVES
Local Education Agency (LEA) Will:
Correctly complete food service
management company (FSMC) procurement
process
Receive approval from state agency
Know where to find resources regarding
FSMC procurement
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SERVICES TO BE EXPECTED
Monthly Profit &
Loss Statement
Regular Presentations
to Board & PTA
Employee Training
Active Advisory
Committee
Menu Components &
Portion Sizes Meet
Requirements
Promotions
FSMC
Nutrition Education
Payroll
Analysis of Trends &
Participation Reports
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Proper Collection
Methods
Acceptable Counting &
Accountability Methods
Support Services
I.e. Dietitian or Chef
Nutrient Analysis Documents
for Administrative Reviews (AR)
3
LEA RESPONSIBILITIES
Annual On-Site
Reviews
Review Edit Check
Worksheets
Determine Free & Reduced
Price Applications
Establish Meal &
A La Carte Prices
Generate and Maintain
Benefit Issuance Document
SFA
LEA
Conduct DC/Verification
Review, Submit &
Certify Monthly
Reimbursement Claim
Review and Approve
Menus
Review USDA Food
Utilization
Establish Advisory
Committee
Review Monthly Profit and Loss
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Statement
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PROCUREMENT PROCESS OVERVIEW
After 4 renewal years,
Begin Process Again
Make Decision to
Renew
Evaluate Food Service
Operation
LEA
SFA
Submit Contract &
Required Documents to
State for Approval
Obtain & Sign
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Contract
Write Specifications
Advertise Request
for Proposal (RFP)
Receive Proposals
Award Contract
Analyze, Score &
5
Compare Proposals
GETTING STARTED
 Federal procurement regulations, state and local
public school contract laws must be followed
 LEA must guarantee open and free competition
 Start process early to assure sufficient time for
FSMC to:
 Develop a thorough, comprehensive proposal
 Attend a facility walk-through while school is
in session
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GETTING STARTED (CONT)
 Before writing specifications and soliciting
proposals, plan and forecast LEA needs.
Review food service operation from prior years
to determine if:
LEA’s food service needs were met
Costs and revenue were as expected
Changes in food service operation need to
be made
Equipment is needed
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WRITING SPECIFICATIONS
 Detailed specifications must be developed by LEA (not by
FSMC)
 Anyone who drafts specifications cannot submit a
proposal for consideration
 All contract requirements must be included
 LEA must clearly define what they want
 Requirements cannot be overly restrictive (i.e. cannot
require potential FSMCs to have operated in New Jersey)
 Must include current state agency Response & Projected
Operating Statement (Form #23)
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WRITING SPECIFICATIONS (CONT)
 Scoring criteria must be included so all FSMC are on level
playing field
 Scoring should identify all evaluation criteria and relative
importance
 Overall cost of the contract should get the most weight
 Transparency of FSMC rebate system should be
included in scoring evaluation
 Include as much information about food service operation
as possible to allow FSMC to give realistic proposal
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CAUTION WHEN WRITING SPECIFICATIONS


Incentives
LEA cannot request and FSMC cannot offer “value
added” incentives such as scholarships, donations,
grants, etc.
Revisions/Clarifications
Revisions and clarifications to LEA’s original
specifications must be made in writing and sent to all
FSMC who expressed interest in submitting a proposal
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CAUTION IF REQUESTING EQUIPMENT IN
SPECIFICATIONS
 FSMC can only offer to purchase equipment if LEA
makes request in RFP
 RFP must include detailed equipment specifications
or technical requirements
 LEA repayment procedures must be included
 Equipment provisions must be for one year only. No
assumptions can be made that LEA will renew
contract for additional years if FSMC purchases
equipment
Note: If equipment is purchased, public school contract
law must be followed and title to all equipment must be
retained by LEA
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ADVERTISING THE RFP
 RFP must be publicly advertised in regional news
source/official newspaper
 20 days minimum required for advertisement prior
to deadline for submission of proposal
 LEA CANNOT advertise RFP exclusively on school web
site
 In addition to the required public advertisement, LEA
can solicit proposals from registered FSMCs by sending
letters or emails
 LEA must provide RFP and specifications to all currently
registered FSMCs who request them
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RECEIVING PROPOSALS
 Proposals can only be accepted from FSMC who are registered and
listed on the Directory of Registered FSMC for School Year 20142015 ( Form #221)
 Overly responsive proposals cannot be considered in the evaluation
 FSMCs cannot offer goods and/or services that were not
requested in specifications provided by LEA
 When directions in the RFP are not followed, the proposal is “non
responsive” and should not be considered
 FSMC proposals should not include any material change from LEA’s
specifications. If LEA accepts any change, all potential FSMC must
be notified and allowed to amend proposal
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ANALYZING, SCORING & COMPARING PROPOSALS
 FSMC must include completed Response & Projected
Operating Statement (Form #23) in proposal. All FSMC fees
must be identified on Page 1
 Evaluate proposals received by using FSMC Proposal
Comparison Form (Form #24)
 LEA must rank and score proposals based on evaluation
criteria included in specifications
 Potential FSMC can be “interviewed” prior to awarding
contract
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UNDERSTANDING FSMC
MANAGEMENT FEES AND
GUARANTEES BEFORE AWARDING
CONTRACT
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FSMC MANAGEMENT FEES
 One overall management fee or two separate
fees (that added together are the overall
management fee) may be charged by FSMC
 A fee is a management fee no matter what it is
called. Some common names for management
fees:
 Management fee
 Administrative fee
 Support service fee
 General & administrative expense
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FSMC MANAGEMENT FEES
ALLOWABLE FEE STRUCTURES
-Flat fixed fee
-Cents per meal fee
-Combination of flat fee & cents per meal
PROHIBITED FEE STRUCTURES
-Cost plus percentage of cost
-Cost plus percentage of income
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ANNUAL FLAT FIXED
MANAGEMENT FEE
EXAMPLE
$10,000 per year
OR
$1000 per month for 10 months
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CENTS PER MEAL MANAGEMENT FEE
 Management fee is based on “X” cents per meal and meal
equivalent
 Meal equivalents are calculated from income received for
non reimbursable sales such as adult meals, a la carte,
special functions, vending, etc.
 Meal equivalent conversion factor must be identified
EXAMPLE
$.045 cents per meal and meal equivalent
Meal equivalent conversion factor of $1.00
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SEPARATE MANAGEMENT FEE AND
ADMINISTRATIVE FEE
EXAMPLE
$.10 cents per meal/meal equivalent management
fee and $.05 cents per meal/meal equivalent
administrative fee
OR
$.08 cents per meal/meal equivalent management
fee and $10,000 per year administrative fee
OR
$10,000 per year management fee and $5,000 per
year administrative fee
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GUARANTEES
FSMC contracts may include one of the
following guarantees:
GUARANTEED BREAK EVEN
GUARANTEED RETURN (PROFIT)
GUARANTEED LOSS (SUBSIDY)
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GUARANTEE CAUTION
 Read proposals/contract to make sure guarantee
is really a guarantee
 Review conditions/assumptions affecting
contract guarantees to determine if they are
realistic and appropriate for your district
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SAMPLE ILLUSTRATION
IS THIS REALLY A GUARANTEED BREAKEVEN?
Guaranteed breakeven language in contract:
“If the actual bottom line is a subsidy(loss), the FSMC will
subsidize the difference up to 50% of the management fee”
Management fee:
$30,000 (50% of fee is $15,000)
Actual bottom line: $26,000 loss
$26,000 Loss
- $15,000 FSMC guaranteed subsidy amount
$11,000 actual cost to LEA
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LEA DID NOT BREAKEVEN!!!!!!!!
AWARDING THE CONTRACT
 Award to FSMC whose proposal, based on scoring and ranking,
was most advantageous to LEA, price and other factors considered
 Obtain board approval to award contract
 Maintain record of procurement history, including reason for
selection of FSMC and basis of contract price
 Contract is awarded for a term of one year only. Contract can be
renewed yearly for four additional years as long as terms and
conditions are not substantially changed
 State agency approved prototype contract must be used
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PROTOTYPE CONTRACT CHANGE REQUEST
If EXACT prototype contract approved by state
agency is not used OR if FSMC is purchasing
equipment at LEA’s request:
STOP
DO NOT SIGN CONTRACT!!!
LEA must obtain state agency approval for
requested changes PRIOR TO SIGNING CONTRACT.
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STATE AGENCY APPROVAL OF CONTRACT
CHANGE REQUEST
If requesting a change to FSMC prototype contract
approved by state agency, submit:
 Completed LEA and FSMC Prototype
Contract/Addendum Change Request Form (#47)
 Unsigned Contract
 Copy of LEA’s specifications if:
 Requesting FSMC to purchase equipment on LEA’s
behalf
 Incorporating specifications into contract
Allow a minimum of 30 business days for State
Agency review
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FINAL STATE AGENCY APPROVAL
If using exact approved contract OR after receiving approval
for change request, submit:
 Completed and signed LEA/FSMC Certification Form (#48)
 Signed contract with original signatures and date signed
 Certified board minutes awarding contract (must contain ALL fees and
guarantee language)
 Copy of actual publicized advertisement regarding RFP
 Page 1 of Completed Response & Projected Operating Statement
(Form #23) for all FSMCs that submitted proposals
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GETTING STATE AGENCY APPROVAL
 Do not sign contract with a separate signature page
 Original signatures and date signed required for FSMC
and LEA
 Board minutes must include fee(s), guarantee,
certifying statement and original signature
 Fee(s) and guarantee in contract and board minutes
must be identical
 Use LEA/FSMC Base Year Checklist (Form #15)to
assure that all required documents are submitted
 As soon as all documents on Form #15 are completed,
mail to State Agency to help assure that LEA’s
agreement packet approval for Fiscal Year 2015 is not
delayed. Do not wait until September 30 to submit
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RESOURCES
 For questions, contact the state agency at 609-984-0692
 For FSMC forms, go to:
 SNEARS “Resources”
 www.nj.gov/agriculture/applic/forms/#5
 Other Resources*:
 “Contracting with Food Service Management Companies:
Guidance for School Food Authorities”
 USDA Procurement Regulations
 “State Agency Guidance on Procurement, Topics 1 & 2”online
USDA training available to the public through the National Food
Service Management Institute
 NJ Public School Contract Law
 “Best Practices for Awarding Service Contracts”
*See Steps and Resources for Privatization of School Food
Services (Form #36) for web addresses
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Thank you for coming
Disclaimer: This presentation was provided as
technical assistance to provide a general
framework of the process of contracting with a
FSMC. LEAs are advised to review all reference
materials and applicable federal, state and local
law to ensure compliance
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