Nutrition Programs

Food Service Management Companies and Vendors (NSLP)

Guidance for School Food Authorities Who Contract with Food Service Management Companies

State Agency Responsibilities

When a school food authority (SFA) contracts with a food service management company (FSMC), the state agency is required to annually review each contract to ensure the contract meets the requirements of regulation 210.16. Each state is required to conduct an on-site review of each SFA contracting with a FSMC to determine the SFA's compliance with all provisions and standards set forth at regulation 210.16. The state agency's on-site review of the SFA-FSMC operation must be conducted once every five years and be sufficient in scope to ensure compliance.

School Food Authority Responsibilities

The National School Lunch Program regulation 210.16 permits a school food authority to contract with a food service management company to manage its school food service operations; the regulations prohibit delegation of certain duties. It is the SFA's responsibility to ensure its food service operation is in conformance with the SFA's agreement under the program.

The SFA is responsible for:

Observing the limits on the use of nonprofit food service revenues including the use of nonprofit food service account funds to pay only allowable costs regardless of the costs billed by the FSMC;
Determining and verifying the eligibility of children for free and reduced-price meals;
Ensuring only reimbursable meals are included on the claim for reimbursement regardless of the number of meals billed by the FSMC; and
Not permitting the accrual of all income and expenses to the FSMC.

A school food authority is required to have specific procedures in place to determine the validity of meals claimed for reimbursement. To ensure the validity of meal counting and claiming systems at the schools under its jurisdiction, the SFA must conduct an on-site review of each school prior to February 1 of each school year. If the review identifies problems with a school's meal counting or claiming procedures, the SFA shall ensure that the school implements corrective action and, within 45 days of the review, the SFA must conduct a follow-up, on-site review to determine if the corrective action resolved the problems. Whether a SFA self-operates its food services or uses a food service management company, the SFA must conduct the on-site review and remains responsible for ensuring deficiencies are identified and effective actions are taken to correct any deficiencies that are found.

Contract Duration and Renewals for Food Service Management and Vended Meal Contracts

School food authorities must ensure that food service management or vended meal contract language indicates that the duration of the contract is no longer than one year. Additionally, options for yearly renewal of a contract must not exceed four additional one-year extensions. Since the decision to renew the contract is an affirmative decision made by both parties to the contract each year, either party, for any reason, may decide not to exercise the renewal option. If the contract is not renewed, the SFA must either conduct a new procurement or self-operate its food service.

Should either party determine revisions to the contract are necessary, non-material changes are generally made when the contract is renewed. These alterations cannot result in substantive changes to the original contract.

The following changes would normally not constitute a substantive change in the contract:

Number of schools—new schools added;
Changes in enrollment—decreases and increases in student enrollment and the corresponding change expected in participation;
Changes in student/adult meal price—meal price changes (determined by the SFA);
Per meal cost increases—cost increases limited to a measurable index; and/or
Meal equivalency—minor adjustments to the per meal equivalency as set forth in the contract.

The basis for renewing the contract, including price increase provisions, if any, should be stated in the contract and be based on a measurable index such as the Consumer Price Index for All Urban Consumers. School officials should ensure that price increases are within the terms of the contract. Click here for prototype forms that you can use to re-negotiate your contract. You must submit a copy of the executed renewal to our office prior to the approval of your program for each fiscal year. Renewals should be mailed to the Illinois State Board of Education, 100 North First Street W-270, Springfield, Illinois 62777.

The Consumer Price Index-Urban (CPI-U) for the year ending December 2005 has increased 3.4%. The CPI-U, Food Away from Home for the same period has increased 3.2% and CPI-U, Food has increased 2.3%.

Re-bidding Food Service Management and Vended Meal Contracts

School food authorities have the option to re-bid the food service management or vended meal contract at any time. Neither party may make or impose material changes to an existing contract during the contract year or as part of the annual contract renewal process. If it is determined that material or substantive changes are necessary, the SFA must conduct a new procurement and re-bid the contract or may choose to self-operate its food service.

Examples of material or substantive changes which could require the SFA to re-bid the contract include:

The existing contract and renewals have expired;
The scope of the contract has substantially changed;
Addition of a program, such as the School Breakfast Program;
Major changes to the formula for determining meal equivalency;
Major shift in responsibilities for SFA/FSMC staff;
Significant changes in the basis for determining guaranteed returns; and/or
The existing contractor has not fulfilled the contract to the SFA's satisfaction.

School food authorities are required to meet state and local procurement regulations that conform to federal procurement and program regulations when developing the proposal and awarding the contract. Regarding the procurement process, SFAs cannot include contract provisions that restrict competition or prevent companies from bidding on the meal services. To assist in the preparation of a food service management or vended contract, prototype contract documents and guidelines are available by clicking here.

To ensure compliance with federal procurement procedures and continued funding, prior to seeking bids SFAs must submit contract documents to the ISBE for review.

Applicability of Federal Requirements to School Food Service Procurements

In August 2000, a final regulation published in the Federal Register moved the procurement procedure requirements for the Child Nutrition Programs from Department regulation 7 CFR Part 3015 to 7 CFR Parts 3016 and 3019. School food authorities are encouraged to share this information with their legal counsel. Please refer to the questions and answers link below for more information regarding how these requirements have changed the procurement procedures for public and nonprofit school food authorities.