Arkansas Department of Education Procuring Services of Purchasing Cooperatives, Group Purchasing Organizations, Group Buying Organizations, etc.

Memo Information

Memo Number
FIN-15-057
Memo Date
1/26/2015
Memo Type
Regulatory
Section
Fiscal & Administrative Services
Regulatory Authority
§7 CFR 210 and 3016, USDA Memo SP 35-2012, Commissioner’s Memo FIN-09-069
Response Required
NO
Attention
Co-op Directors; Elementary Principals; Middle School Principals; High School Principals; Superintendents; Child Nutrition Directors, Purchasing Agents

Contact Information

Memo Text

The purpose of this memo is to provide guidance on applicable regulatory provisions and principles related to School Food Authorities (SFAs) seeking the services of entities that self-identify as purchasing cooperatives, group purchasing organizations, and group buying organizations, etc. In their offer to help SFAs connect with other entities such as purchasing cooperatives, often these organizations represent to SFAs that it is not necessary to undertake formal procurement efforts in order to retain the entities’ services. All SFAs must follow Federal procurement regulations when entering into contractual agreements with entities for goods or services. SFAs are required to conduct procurement transactions in a manner that provides full and open competition (7 CFR 210.9, 210.21 and 3016.36(c)). These requirements apply when an SFA seeks the services of an entity such as a purchasing cooperative, group purchasing organization or group buying organization or any entity offering to facilitate access to those types of entities. This is true even when services are offered free of charge. The SFA should seek guidance from the Arkansas Department of Education/Child Nutrition Unit (ADE/CNU) before agreeing to use any services without conducting a competitive procurement. This memo discusses regulatory provisions and principles of two ways an SFA may seek the services of such entities: Cooperative Purchasing and Intergovernmental Cooperative Agreements. Cooperatives and SFAs   An SFA may participate in a cooperative comprised solely of SFAs without conducting a competitive procurement if the local cooperative was created by the SFAs banding together to get better pricing and the cooperative is designed to act on its own behalf. A cooperative would follow Federal procurement regulations when procuring goods and services for its members. The cooperative of SFA’s, as a collective group, must procure in the same manner as an individual SFA. If the cooperative is not comprised solely of SFAs acting on their own behalf, and contains a third party that is not an SFA, the SFA cannot join the cooperative without conducting a competitive procurement. For example, a cooperative contains a third party advisor or consultant that may have a financial interest in the purchasing of the cooperative. The SFA cannot join this cooperative without competitively procuring the services. Intergovernmental Cooperative Agreement and “Piggybacking” Intergovernmental cooperative agreements may be defined as an arrangement between or among two or more local governments for achieving common goals or providing a service. An SFA may only enter into an intergovernmental cooperative agreement with a governmental agency and “piggyback” onto an existing agreement for goods or services when that agreement was procured consistent with Federal child nutrition program procurement regulations. An SFA should carefully review the procurement procedure and solicitation used by the governmental agency and the resulting contract to ensure that adding the SFAs additional scope of services do not create a material change in the governmental agency contract. A material change is a change made by one party or both parties to the terms and conditions of the contract that significantly impacts the compensation given to the bidder. Material changes may arise with “piggybacking” on a contract because the parties did not anticipate the increase in quantity of goods and services to fulfill the needs of the SFA. Consequently, the governmental agency may have to rebid the contract. The SFA must obtain documentation from the parties involved in the procurement and existing contract in order to ensure the return of discounts, rebates, and other applicable credits in addition to Federal procurement requirements. The cost reimbursable contract should contain program requirements to the return of discounts, rebates and other applicable credits to the SFAs nonprofit food service account. The SFA should consult their own legal counsel to ensure the existing contract will ensure access to all records that indicate discounts, rebates and other applicable credits accrue to the SFA.   SFAs should seek guidance from ADE/CNU prior to executing a cooperative purchasing agreement or an intergovernmental cooperative agreement with a governmental entity that allows “piggybacking” onto an existing contract. Further information on Purchasing Cooperatives and procurement regulations can be found in the attached Commissioner’s Memo FIN-09-069. For additional information, contact your area specialist or Patricia Winders at (501) 324-9502.