Management fee

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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
4/13/2015
2
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
4/13/2015
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
4/13/2015
Statement
4
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
4/13/2015
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
4/13/2015
6
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
4/13/2015
7
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)
4/13/2015
8
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
4/13/2015
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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
4/13/2015
10
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
4/13/2015
11
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
4/13/2015
12
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
4/13/2015
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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
4/13/2015
14
UNDERSTANDING FSMC
MANAGEMENT FEES AND
GUARANTEES BEFORE AWARDING
CONTRACT
4/13/2015
15
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
4/13/2015
16
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
4/13/2015
17
ANNUAL FLAT FIXED
MANAGEMENT FEE
EXAMPLE
$10,000 per year
OR
$1000 per month for 10 months
4/13/2015
18
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
4/13/2015
19
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
4/13/2015
20
GUARANTEES
FSMC contracts may include one of the
following guarantees:
GUARANTEED BREAK EVEN
GUARANTEED RETURN (PROFIT)
GUARANTEED LOSS (SUBSIDY)
4/13/2015
21
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
4/13/2015
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
4/13/2015
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
4/13/2015
24
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.
4/13/2015
25
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
4/13/2015
26
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
4/13/2015
27
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
28
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
29
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
4/13/2015
30
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