Food Service Management Company Part III

The Bid Specifications 

First let’s be clear about a bid.  Whenever I use the term “bid” I am referring to a formal bid process not an RFP (Request for Proposal).  What’s the difference?  An RFP is simply that - a request for a proposal in which you ask potential vendors to provide you with a proposal that is a summary of what they will do for you for a specific fee.  In an RFP the solicitor will in effect say to all interested vendors, “I have X amount of money to (for example) in program revenue – tell me what you will do (how, etc.) for that amount of money.”  Then all vendors can submit their proposal, for consideration.  Each vendor will have a different approach and idea for completing the project but each would receive the same amount of money.  Often there is a rating system in which the vendor’s response to certain aspects of the RFP is weighted and a final score assigned.  Then a decision is then made as to which vendor receives the award. 

A formal bid, is very different.  In a bid you set forth the terms, the conditions, the specifics and basis (cost) on which the award will be made.  Essentially you ask each vendor how much they will charge you to provide the exact same service(s) that meet the criteria and time frame set forth in your bid specifications.

Essentially in an RFP the service and approach to delivery of the service differs by vendor but the fee received could be the same for everyone.  In a formal bid, all bidders quote a price for delivery of the same service as detailed in the specifications.  So the price differs but the service should be the same. 

Once a school decides to “bid out” the operation of its school cafeteria, the real work begins.  Unfortunately many school business officials think that once the bid is awarded, the management company takes care of everything and they have little more to do with respect to the food service program.  Wrong.  It is the School or District as the Sponsoring Agency who is charged with protecting the financial and nutritional integrity of the Child Nutrition Programs operating within their school(s).  Leaving most food service management companies without oversight and direct involvement is (in my opinion) granting them a license to steal from the program.  The most important first step in getting a reputable management company and one who will work with and for the school district instead of for them is the bid specifications that will be used.

 The bid specifications is the instrument by which the school “levels the playing filed” for all bidders, protects itself from unscrupulous bidders, and ensures the financial and nutritional integrity of its Child Nutrition Programs.  Some school districts use a formal bid process, others use an RFP (Request For Proposal) Process, while some others (believe it or not) simply pick a company and sign the company’s standard contract. 

If you want to have the best company operate your school’s lunch and breakfast programs at the best price a formal Sealed Bid Process is the only way to go.  This process entails developing a set of standardized bid specifications, issuing public notice, mailing copies of the bid to several management companies, scheduling a mandatory “walk through” or “pre bid meeting”, and having a set bid opening date and time with the award of the contract going to the lowest (responsible) bidder.  

Bid specifications should set forth for all bidders certain information that each will use in calculating their bid or with a “re-bid” at the end of the initial contract term.  Bidding regulations and requirements vary by State and you should consult your applicable State Agency before preparing or issuing bids or bid specifications to ensure that you are in compliance with all local and State laws.  However the following are items that I believe should be included in the detailed specifications accompanying every bid.   These include:

Average number of Breakfasts and Lunches (and Snacks) served on a daily basis by category – free, reduced price, and paid.  This is necessary for calculation of available revenues.

• The selling price for all meals and ala carte items– reduced price and paid student meals, adult meals and all ala carte items.  Also for calculation of available revenues.
• A sample breakfast and lunch menu for the elementary and secondary schools.  This menu should depict the types of foods the school community wants offered.  So all companies are bidding on and considering food costs for the same type of menu.
• A requirement to submit an insurance certificate for at least $1,000,000.00 naming the school/district as a co-insured.  To protect the school/district in the event of a lawsuit.
• A Performance Bond equal to a minimum of 10% of the projected operational costs for the year.  To protect the school/district in the event the company goes bankrupt or vanishes.
• A (Optional) request for a Guaranteed Return to the school/district.  This is predicated on the total available revenues to the program and the amount of money that a food management company truly needs to operate the program allowing them a fair profit margin.  Business Managers must calculate this amount by using the process described above that the FSMC would used to calculate available revenue.
• A listing of all current employee positions, number of hours worked, and current salary.  This information is provided to protect the current staff from a company “low balling” the bid and then cutting the salary of the staff to make their bid work.  These food service workers are members of the school community and really should be protected to the greatest extent possible.
• A summary of typical operational expensed and whether the district or the FSMC will be responsible.  For example, who will be responsible or pay for:
• Trash Removal from the building
• Cleaning of the kitchen each night
• Wiping down cafeteria tables between meal periods
• Replacement of flatware
• Telephone and long distance service
• Laundry
• Equipment repair
• Storage costs
• Sales tax
• A meal conversion rate for Ala Carte sales
• Standard of Identity for foods served in the program.
• An indicator of the type of Menu Planning Option the school or district is requesting.  Remember the district not the company must make this determination.
• Sanitation requirements
• Staff development and training programs
• Emergency closing of school
• Licenses, fees, & taxes
• Financial Accounting, Books & Record Accessibility
• Term of the contract and termination
• Date of mandatory walk through
• Items required by State and Federal Regulations and more

 I cannot emphasize enough the importance of the bid specifications to protecting the school during this process.  Once the bid specifications are prepared and issued, everything possible must be done (especially on a re-bid) to encourage competition and the submission of bids by multiple bidders.  This last point is so very important and one which many Business Officials do superficially when a “likeable”, “long-term” company has operated the district’s program.  They become comfortable and trusting with the company, and its representatives.  Often this leads to “skewing” the bid specifications to favor one company over other bidders.  This is a huge mistake and will always cost them money.  The purpose of bidding is to bring competition and with competition will come lower prices and a resulting increase in “profits” for the school. 

Lastly with respect to bid specifications, the district must always prepare the bid specs.  Never allow the incumbent or any FSMC to assist or consult on the content of the bid specifications.  New and/or inexperienced Business Managers will often allow an incumbent company to write the bid specifications in an effort to “assist them”.  Obviously the company will skew the bid specs to benefit them and limit their competition.  Good for the company, bad for the school/district. 

Next Posting - an actual description of only three of the tactics I have seen employed by a FSMC.   Many State Agency and school district personnel simply do not have a clue of how the FSMC really operates or how offering a free – no charge breakfast to students or promoting a $.10 breakfast can actually move money from the district to the FSMC .  Don’t believe me – read on.

 Note: The content of this and all postings in this series - regarding Food Service Management Companies remain the property of Frank Rinaldi.  All rights are reserved.  No portion of this or any of these postings may be copied, reproduced, or distributed without the written approval of Frank Rinaldi.