Procurement Guidance Part 7: Buy American Provision in School Nutrition Programs

Procurement Guidance Part 7: Buy American Provision in School Nutrition Programs


Welcome to the California Department of Education’s,
or CDE’s, Procurement Guidance Video Series, Part 7: Buy American Provision in School Nutrition
Programs. My name is Courtney Hardoin and I am a Nutrition
Education Consultant in the Education and Nutrition Policy Unit at the CDE. I am joined by my colleague, Bart Lyszkiewicz,
Program Analyst in the Resource Management Unit The training objectives of this video are
for school food authorities, or SFAs, to: • Learn the definition of the Buy American
provision • Identify the two limited allowable exceptions
to purchasing nondomestic products • Determine how an SFA can ensure compliance,
and • Understand how CDE reviewers will monitor
an SFA’s compliance with the Buy American Provision. Bart and I will refer to resources, accessible on the Internet, throughout this video. To access the Web pages for the resources
discussed in this video, select the “Show More” tab directly below the video. So, where in federal law and regulations is
the Buy American requirement, and what is the intent of the requirement? The Buy American requirement was added to
the National School Lunch Act, or NSLA, by Section 104(d) of the William F. Goodling
Child Nutrition Reauthorization Act of 1998 (Public Law 105-336). The specifics of the requirement can be found
in Title 7, Code of Federal Regulations, ( 7 CFR), parts 210.21(d) and 220.16(d). These regulations require program operators
purchasing agricultural food products that are served in the National School Lunch Program
and the School Breakfast Program to include the Buy American provision in their solicitations
and contracts. The Buy American provision is intended to
support the mission of child nutrition programs, which are to serve children nutritious meals
and support American agriculture. Requiring compliance with the Buy American
provision also supports SFAs working with local, or small, minority, and women-owned
businesses as required by Federal regulations in 2 CFR, Section 200.321. The USDA also encourages purchasing food products
from local and regional sources when expanding farm to school efforts. Now that we know the why, we will now look
at the exact language. The Buy American provision, in Section 12(n)
of the NSLA (42 U.S. Code 1760[n]), requires SFAs to purchase, to the maximum extent practicable,
domestic commodity or product. Easy to understand? Probably not. Why don’t we break down some of the key words
from this quote. Let’s begin with what is meant by “domestic
commodity or product.” The term, domestic commodity, is defined as
an agricultural commodity that is produced (e.g., grown, raised, etc.) in the U.S. and
a food product as a processed commodity; where the finished product is substantially comprised
of agricultural commodities that are produced in the U.S. Confused? I was after reading this quote. To get a better understanding of the difference
between the terms “commodity” and “product”, let’s look at an example. Think of domestic commodities like chicken
or flour, and a domestic product like a breaded chicken nugget. If you are only purchasing chickens, then
all the chickens must be raised in the U.S.; however, if you are purchasing breaded chicken
nuggets, then a substantial portion of the chicken meat and flour used for breading must
have been produced in the U.S. Now that we have a better understanding of
the terms commodity and product, we can move on to what “substantial” means. But before we continue, I would like to leave
you with a couple of important facts to remember. 1. The food product can only be processed in
the U.S. This means that if the breaded chicken nuggets
were comprised of chicken and grains to make flour raised or grown in the U.S., but were
processed in Mexico, then the food product would not meet the Buy American requirements
because the agricultural commodity was processed outside of the U.S. 2. The Buy American provision does not apply
to nonagricultural products, such as paper products and water. Now I will quantify the term “substantial”
for you. When the regulation indicates that the product
(i.e., breaded chicken nugget) must be substantially comprised of agricultural commodities, does
it mean 100 percent? 75 percent? 50.1 percent? As we know, many times these federal rules like to be vague, but in the specific instance we received guidance on what “substantial”
means. The term substantial is defined as over 51
percent of the final processed product (by weight or volume) consists of agricultural
commodities that were grown domestically. This means that foods that are unprocessed,
must consist of domestic agricultural commodities (100 percent American) and foods that are
processed must contain domestic agricultural food components, which are comprised of over
51% domestically grown items, by weight or volume, as determined by the SFA. It is important to note that while USDA Foods
are domestic, processed end products that contain USDA Foods need to meet the 51% domestic
requirement, by weight or volume. This definition of domestic product serves
both the needs of schools and American agriculture. Products from Guam, American Samoa, Virgin
Islands, Puerto Rico, and the Northern Mariana Islands are considered domestic products under
this provision, as these products are from the territories of the U.S. We have now completed discussing our definition
of what the Buy American requirement means, now we are going to discuss who must adhere
to this requirement. Does the Buy American requirement apply to
all child nutrition program operators? According to Title 42, U.S. Code, Section
1760(n), SFAs that purchase a domestic commodity or product for the school lunch program or
the school breakfast program must adhere to the Buy American provision. This includes SFAs that also operate a Child
and Adult Care Food Program or a Summer Food Service Program. Per 7 CFR, Part 210.14, all federal funds,
all money received from children as payment for program meals, all proceeds from the sale
of competitive foods, and all other income generated by the school food service must
accrue to the food service account also known as the cafeteria fund. As a consequence, the entire nonprofit school
food service account becomes subject to Federal procurement standards, including the Buy American
provision. Entities purchasing foods or products on behalf
of the SFA, such as food service management companies, meal vendors, group purchasing
organizations, cooperatives, and other SFAs entering into inter-entity agreements must
also comply with the Buy American provision. Federal guidance provides for two limited
exceptions to the Buy American provision. These exceptions allow for an SFA to purchase
food products that do not meet the domestic standard in circumstances when use of domestic
foods is truly not practicable. We have provided you with both exceptions
on this slide: * The first exception is if the product is
not produced or manufactured in the U.S. (and other allowable territories) in sufficient and reasonable available quantities of a satisfactory quality. * The second exception is when competitive
bids reveal that the cost of the U.S. product are significantly higher than non-domestic
products. The SFA must define what is considered “significantly
higher”. There is no specific dollar amount or percentage
triggering an exception and it is the SFA’s responsibility to determine the threshold. For additional information concerning this
issue, you should refer to question nine in the USDA Policy Memo SP 38-2017.Most likely
one of your first questions would be, to whom do I request an exception? Do I contact the CDE, the USDA, my senator? There is no requirement to request a waiver
to the Buy American provision from the CDE, USDA, or Senator in order to purchase a non-domestic
product. However, SFAs are expected to maintain documentation,
and provide documentation supporting their use of the exception to a CDE reviewer during
their next SNP administrative review (AR) and procurement review. SFAs are expected to provide documentation
of communications with their food suppliers. This can include e-mails and documentation
of telephone communications. Alternative considerations to approving an
exception and reasons for the exception must be provided to a reviewer as to why the domestic
product is being substituted, using one of the exceptions. The CDE will review the documentation during
the offsite procurement reviews of the SFA’s procurement practices. You may also be asked for your documentation
during your SNP AR. While exceptions to the Buy American provision
exist, SFAs should never use them as a standard practice in their procurements. Before using an exception, SFAs should determine
whether: 1. There are other domestic sources available
for the product than what the current vendor has to offer. 2 .There are domestic products that could easily be substituted on the menu for the nondomestic product. For example, can an SFA substitute domestic
pears for non-domestic apples? 3.This is the best time of year to solicit
bids for this product? For example, if the SFA contracted earlier or later in the season, would prices or availability change? And,
4.The cost and availability of domestic and nondomestic foods was verified and documented
through a third-party; for example, the USDA Agricultural Marketing Service, or AMS. More information and a link to the USDA AMS
Web page is discussed later in this video. There are two important axioms to remember
when it comes to documentation: 1. If you do not document it, it did not happen,
and 2. No one ever got into trouble for having
too much documentation Explaining why having documentation is good,
but you may ask, can you provide me with a sample of what you are looking for? Ask and you shall receive. USDA Policy Memo SP 38-2017, dated June 30,
2017, includes sample language in question 5 of the Questions and Answers section that
SFAs should use in solicitations and contracts to comply with the requirement that the SFA
retain records documenting any exceptions to the Buy American provision. This sample language notifies contractors
of their requirement to request approval from the SFA to allow an exception to the Buy American
requirement. The sample language states: “Exceptions to
the Buy American provision are very limited; however, an alternative or exception may be
approved upon request. To be considered for an alternative or exception,
the request must be submitted in writing to a designated official, a minimum of (insert
number of days) in advance of delivery. The request must include the:
1. Alternative substitutes that are domestic and meet the required specifications:
a) Price of the domestic food alternative substitutes; and
b) Availability of the domestic alternative substitutes in relation to the quantity ordered
2. Reason for the exception: limited/lack of availability of price (include price)
a) Price of the domestic food product; and b) Price of the non-domestic product that meets the required specification of the domestic product. Just to quickly recap, we have covered what the Buy American requirement is and where
to find it. We have also gone over when you can use exceptions
to the requirements. In addition, we gave you sample language to
use in your procurement documents. Now we are going to cover how you must implement
the Buy American provision. In order to ensure compliance with the Buy
American provision, SFA’s must: 1. Ensure solicitations and contracts include the requirement for domestic agricultural commodities and products
2. Include the requirement in documented procurement procedures
3. Retain records documenting any exceptions 4. Monitor contractor performance to ensure
their compliance with all contractual requirements These four requirements are outlined in 2 CFR, Section 200.318(b) and USDA Policy Memo SP-38-2017. The link to the USDA Policy Memo is listed
on the slide and is accessible by selecting the Show More tab, directly below this video. USDA Policy Memo 38-2017 includes additional ways the SFA can comply with the Buy American provision. For instance, the SFA can:
• Require suppliers to provide certification of domestic origin of food products delivered
and invoices submitted and document this in the SFA’s procurement procedures
• Examine product packaging and delivery invoices or receipts to ensure the domestic
food that was solicited and awarded is the food that is received
• Require suppliers to identify the percentage of U.S. content in food products (including
processed end products) • Conduct periodic review on storage facilities
to ensure the products received are the ones solicited and awarded, and that they comply
with the Buy American provision. • Include domestic requirements in bid specifications
• And lastly, additional ways the SFA can comply with the Buy American provision is
to verify cost and availability of domestic and nondomestic foods using data in the USDA
AMS’s Run a Custom Report Web page at the link listed on this slide. In addition to the USDA providing sample language
for exceptions in USDA Policy Memo SP-38-2017, they also provided sample specification language
that SFAs can place in their solicitations and contracts in question four of the Questions
and Answers section. Examples of Buy American language that the
SFA may include within the specifications for solicitations and contracts to comply
with the Buy American provision include: 1. Utilizing the Buy American definitions in
7 CFR 210.21(d) in all food product specifications, invitations for bids, and requests for proposals
for food products, contracts, purchase orders, and other procurement documents issued
2. Requiring a certification of domestic origin for products which do not have country of
origin labels 3. Including the following language: “The (agency
name) participates in the National School Lunch Program and School Breakfast Program
and is required to use the nonprofit food service funds, to the maximum extent practicable,
to buy domestic commodities or products for Program meals. A domestic commodity or product is defined
as one that is either produced in the U.S. or is processed in the U.S. substantially
using agricultural commodities that are produced in the U.S. as provided in 7 CFR 210.21(d).” Since the Buy American language must be present
in all phases of the procurement process, from solicitation to contract oversight, the
USDA has provided sample language for contractors and SFAs to use in their documents during
the solicitation and bidding process. Keep in mind that this language should be
tailored to the needs of the contracting parties. This slide lists the USDA recommended Buy
American certification language for contractors to include, to document their compliance with
the Buy American requirement. It states: “We certify that (product name)
was processed in the U.S. and contains over 51% of its agricultural food component, by
weight or volume, from the U.S.” This slide lists the language that SFAs should
include in their solicitations during the bidding process to document their compliance
with the Buy American requirement. 1. “We require that suppliers certify the food
product was processed in the U.S. and certify the percentage of U.S. content, by weight
or volume, in the food component of processed food products supplied to us.” 2. “We require bidders to certify that (product
name) was processed in the U.S. and contains over (% of weight or volume) of its agricultural
food component from the U.S.” For more guidance on how to ensure compliance,
refer to Questions and Answers six and seven in USDA Policy Memo SP-38-2017. As we all know, the CDE is required to monitor
compliance. USDA Policy Memo SP-38-2017 details how state
agencies will monitor the Buy American provision during the off-site and on-site portions of
both an AR and procurement review. During the off-site Local Agency Procurement
Review, the CDE will: 1. Determine if SFAs are purchasing domestic
commodities as defined in 7 CFR 210.21(d) 2. Review a sample of supplier invoices or
receipts to determine whether the solicited-for domestic foods were provided by the awarded
contractor 3. Check that solicitations and contracts contain
the Buy American certification language 4. Coordinate with the AR reviewers on the
on-site Buy American observations Now we will review what the CDE is required
to do during the on-site review. During the on-site SNP AR, the CDE must review
the labels on agricultural commodities of the SFA’s on-site and off-site storage facilities
in four categories, (dry, canned, refrigerated, and frozen), and review a sample of supplier
invoices or receipts to ensure the country of origin is the U.S. or its territories. If, during the on-site review, the CDE finds
that the information on the label is incomplete (for example, the label only notes that a
product was processed in the U.S. but does not note the product’s country of origin)
or the CDE cannot otherwise determine from the label where the product was produced and
processed, the CDE reviewer must review the SFA’s solicitation and contractual documents
for Buy American language. The reviewer may assume the product is compliant
with the Buy American requirements only if the solicitation and contract documents contain
the Buy American provision or language on the requirement to provide domestic foods. If the reviewer identifies exceptions, the SFA must provide documentation justifying the exception. If nondomestic products are identified and
there is no documentation justifying the exception, the CDE must issue a finding and require corrective
action. Finally, we will briefly cover the types of
review findings the CDE may need to issue. This slide includes a partial list of corrective
action that the CDE reviewer may issue if he/she uncovers findings during the off-site
or on-site review for compliance with the Buy American provision. Since the on-site review is part of the “General
Area” in the AR, such findings will not result in fiscal action. Some potential corrective actions include
requiring an SFA to: • Amend procurement documents, or a contract,
to include Buy American language or issue a new solicitation if an amendment causes
a material change to a contract • Attend procurement training
• Monitor food deliveries to ensure that the correct domestic food components contracted
for are delivered • Fiscal action for repeat or serious findings
on a case-by-case basis Because the CDE believes that we exercise
our greatest oversight when we provide our program operators with tools to be successful,
I will now provide you with a list of resources to assist you as you navigate procurement. To conclude this video, there are several
resources on the Internet to support SFAs with the Buy American provision in addition
to those referenced in this video. The CDE Procurement in Child Nutrition Programs
Web page includes links to Buy American guidance and the USDA Buy American Policy Memos. The Institute of Child Nutrition has designed
a comprehensive Procurement in the 21st Century Web page, and the USDA has developed a Procuring
Local Foods Web page. Both Web pages include guides that cover a
variety of procurement topics, including the Buy American provision. In addition, SFAs can locate Buy American
guidance, CDE Management Bulletins, and USDA Policy Memos by visiting the bottom two Web
pages on this slide and typing “Buy American” in the search function. Links to these Web pages are also available
by selecting the “Show More” tab directly below this video. The Nutrition Services Division Procurement
Resources Unit has an e-mail address for SFAs to send procurement questions. Please send your questions by e-mail to [email protected]
or call 916-322-2498, option 7. Other ways to receive NSD updates include accessing our Web site, following us on Twitter, and viewing our other YouTube videos. SFAs can print a certificate of completion
for this video by accessing the link in the Show More tab directly below this video. Keep this certificate on file, as you may
be asked to show it during an AR. For SNP operators that must meet the professional
standards requirements, this slide provides the required information to track your training
for today. This concludes Part 7: Buy American Provision
in School Nutrition Programs, in the CDE Procurement Guidance Video Series. This institution is an equal opportunity provider. Have a great day!

Daniel Yohans

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