B02 Attachment 1 PWS.pdf

USDA FOOD AND NUTRITION SERVICE ON BEHALF OF SUPPLEMENTAL

NUTRITION & SAFETY/FOOD DISTRIBUTION DIVISION

TO PROVIDE MONITORING AND PROGRAM SUPPORT FOR THE COMMODITY

LETTER OF CREDIT (CLOC) AND CASH IN LIEU OF COMMODITY SITES FOR

NATIONAL SCHOOL LUNCH PROGRAM (NSLP)

Expected Period of Performance: 1/1/2021 – 12/31/2021

PERFORMANCE WORK STATEMENT

1.0 INTRODUCTION

The United States Department of Agriculture (USDA) supports several nutrition programs, including the National School Lunch Program (NSLP). Since its inception in the early 1930s, the NSLP has been guided by two major objectives:

• to provide nutritionally sound meals to school children and

• to encourage the consumption of domestic agricultural products.

With the exception of the state of Kansas, which receives 100% of its entitlement as cash per the National School Lunch Act and Child Nutrition Act of 1966 Amendments of 1975 (P.L. 94-105), federal support for schools participating in the NSLP comes from direct cash subsidies as well as the donation of agricultural commodities, which constitute approximately 15-20% of the food offered in each school lunch.

In order to support the needs of schools in providing wholesome meals that meet national nutrition standards with these domestic products, a catalog of foods available for donation (USDA Foods), including bulk foods, fresh produce, and processed selections, is developed annually. The USDA purchases most products directly from domestic agricultural markets—more than two billion pounds of food from American farmers—although some USDA Foods may be donated from existing government stock when available. Commodity purchases are guided by a procurement plan that reflects USDA’s best estimate of agricultural surpluses and school food program’s preferences.

In the mid-1980s, USDA conducted a pilot study of two alternatives to the commodity donation program:

• Cash in lieu of commodities (CASH) and

• Voucher approach that used commodity letters of credit (CLOC).

Subsequent legislation has permitted the continuance of these alternatives for the School Food Authorities (SFAs) in the original study. For these SFAs, monitoring entitlement fund availability and eligible purchases requires a different approach to program support than USDA’s management of the current commodity donation system. Because purchasing decisions are less centralized, alternative programs require additional oversight of entitlement funds disbursement, including review of CLOC purchases to determine eligibility and value of reimbursement.

2.0 BACKGROUND

Since the l980s, there has been considerable debate over the feasibility of an alternative to direct donation of USDA Foods in the NSLP. Despite the many positive aspects of providing domestic commodities, the donation program was the subject of scrutiny in the late 1970s and early 1980s.

Common criticisms included the timing of deliveries, the need to transport and store donated commodities, the choice and availability of commodities provided, and limitations to commodity form and unit size.

As part of the 1981 Agriculture, Rural Development, and Related Agencies Appropriations Act (P.L.

96-528), a congressional directive mandated the USDA to conduct a three-year study comparing two alternatives to the existing commodity donation program. The study was extended with the enactment of the Further Continuing Appropriations Act for Fiscal Year 1984 (P.L. 98-151). Beginning in School Year (SY) 1982-83, 96 School Food Authorities (SFAs) from 29 states were assigned to one of three study groups:

• Control group included 32 SFAs, which continued to use the existing commodity donation program for the duration of the study. This group provided a baseline for comparing the alternative approaches.

• For the first alternative approach, 33 SFAs were assigned to the CASH group. They were allocated the cash equivalent for USDA Foods they would have received through the donation program. Few limitations were placed on these funds beyond requiring the money be spent on the food service program.

• For the second alternative approach, 31 SFAs were assigned to the CLOC group. Letters were equivalent to the value of the donated USDA Foods they would have received and also specified what commodities to purchase as well as the purchase and delivery periods;

expenditure was restricted to foods that were comparable to scheduled USDA Foods donations for the NSLP. In this way, CLOC funds promoted market support for the same agricultural commodities USDA was purchasing.

A report on the final results of the initial demonstration was published in 198611. Most SFAs were pleased with the flexibility offered by the alternatives; however, this increased flexibility allowed many SFAs to buy more highly processed foods, removing fewer pounds of raw commodity from the market for some commodities. Thus, the CLOC alternative provided less support for domestic agriculture compared with the existing commodity donation program. USDA recommended that the alternatives be discontinued in School Year 1984-85; however, a series of legislative enactments, including the Child Nutrition Amendments of 1992 (P.L. 102-342) allowed the SFAs who participated as CASH or CLOC sites to continue temporarily through September 30, 1994.

Although the study did not provide compelling evidence sufficient to warrant the dismantling of the existing commodity donation program, it did point out some program deficiencies. Congress laid the groundwork for system improvements with the passage of the Commodity Distribution Reform Act and WIC Amendments (P.L. 100-237) in 1988. Subsequent changes to the commodity donation program have included improved labeling and product identification, increased product varieties, improved packaging, technology to support ordering and scheduling of deliveries, and the adoption of unitized deliveries. Additionally, the catalog of available foods has been aligned with current nutritional standards and meal patterns introduced by the Healthy, Hunger-Free Kids Act of 2010 (P.L.

1 St. Pierre, Robert G. et al. Evaluation of Alternatives to Commodity Donation in the National School Lunch Program: Final Report

(Volume 6). Cambridge, MA: Abt Associates Inc., 1986. Web [http://naldc.nal.usda.gov/catalog/46396] http://naldc.nal.usda.gov/catalog/46396 http://naldc.nal.usda.gov/catalog/46396

111-296), which include a reduction of fat, salt, and calories and increase in fruits, vegetables, and whole grains.

In 1989, the Conference Report accompanying the Child Nutrition and WIC Amendments Act (P.L.101-147) authorized USDA to review and make changes to the CLOC program in order to better accomplish its mandate to support domestic agricultural markets. USDA Food and Nutrition Service (FNS) revised the CLOC operating procedures, and these went into effect at the beginning of SY 1990-

91. These modifications focused on defining letters of credit in terms of commodity specificity as well as the timing of the purchases and deliveries, crediting policies, and the guarantee that these purchases were of domestic origin.

An evaluation of the modified CLOC system was published in 19922. This study indicated that major differences in performance between CLOC and commodity donation SFAs had narrowed since the previous study and subsequent modifications to the alternative programs. CLOC SFAs were able to enter the market at the same time as USDA and remove approximately the same amount of products from the market as the matched commodity sites; however there was still some question as to whether CLOC purchases yielded equivalent market impact. In addition, there was insufficient information to judge the administrative feasibility of CLOC at the state vs. national level.

The Healthy Meals for Healthy Americans Act of 1994 (P.L. 103-448) allowed permanent participation in the alternative systems for those sites that had been part of the demonstration. While there have been no new SFAs using the CASH or CLOC approaches, some SFAs from the original study have opted out of continued participation and now receive commodity donations. As of SY 2014-15, there are 32 CASH sites and 24 CLOC sites.

The fundamental difference among the three systems is the location of food purchase decision-making.

In the commodity donation system, food purchase decisions are centralized at the national level. USDA decides which foods will be purchased, including the form and type of packaging, as well as when they will be bought and delivered. Although SFAs are invited to provide input, decisions about market demand are largely centralized in Washington, DC.

The CLOC system represents a movement toward decentralization of food purchasing authority. A comparison of operations features between the commodity donation and CLOC systems is provided as Exhibit 1. CLOC SFAs are given letters of credit with a cash- value equal to their commodity entitlement. USDA decides on the general type of food to be bought in order to support specific agricultural markets (e.g., by issuing beef, pork or turkey letters of credit), but SFAs are allowed to purchase the targeted commodities locally in a form and in a size that best suits their needs and may have these products delivered at a time convenient to them. For example, if they lack modern kitchen equipment or find that labor costs are excessive, they may choose not to prepare meals from scratch;

the SFA might purchase prepared foods (e.g., pizza) instead of raw ingredients (e.g., flour, tomato sauce, oil). Another flexibility is that SFAs can use letters of credit for the same raw ingredient donated by USDA (e.g., bulk ground beef) but choose a form and package size that better meets their needs and storage capacity.

The CASH system decentralizes the purchasing activity to its logical extreme. As with CLOC SFAs, these sites receive an entitlement equal to the value of USDA Foods they would receive through commodity donation; in this system, SFAs receive cash in lieu of commodities. Other than requiring that the money be spent on the food service program, USDA places few restrictions on how the cash entitlement is applied to purchases. The money need not even be spent for food; it can be spent on

2 Daft, Lynn M. and Donald W. Westfall. Commodity Letter of Credit Modification Demonstration Evaluation Final Report.

Alexandria: Abel, Daft & Early, March 1992. Web. [http://naldc.nal.usda.gov/catalog/44891] http://naldc.nal.usda.gov/catalog/44891 http://naldc.nal.usda.gov/catalog/44891 labor, equipment, or any other legitimate food service operating expense. If the money is used to purchase food, that food must be of domestic origin.

Establishment and Distribution of Commodity Entitlement

In order to determine the total value of the cash or letters of credit to be allocated to each SFA in the alternative programs, USDA calculates the cash equivalent value of USDA Foods the SFA would receive under the commodity donation program.

At the beginning of each SY, this is estimated by multiplying the SFA’s total NSLP participation (number of reimbursable NSLP lunches served) from the second preceding year by the current commodity rate ($0.3625 in SY 2019-20). In December, these estimated entitlements are adjusted to reflect actual participation from the prior SY. By the end of the year, each CASH and CLOC SFA receives an equivalent to commodity entitlement based on the actual count of reimbursable lunches served in the prior year. This procedure for generating entitlement estimates was adopted to parallel the way entitlement is calculated in the commodity donation system.

NSLP Reimbursable Lunches (prior SY)

× Current Commodity Rate Commodity Entitlement

Once entitlement estimates are established, CASH and CLOC SFAs receive funds by direct deposit at the beginning of each quarter of the school year: July 1st, October 1st, January 1st, and April 1st.

CASH SFAs receive the cash value of their entitlement in equal disbursements of 25 percent of the total entitlement each quarter.

CLOC SFAs receive a proportionally greater share of their entitlement at the beginning of the school year: 36 percent in each of the first two quarters, 21 percent in the third quarter, and 7 percent in the final quarter.

CASH CLOC

July 1 25% 36% October 1 25% 36% January 1 25% 21% April 1 25% 7%

The reason for the disproportionate disbursement of funds during the school year to CLOC SFAs is to correspond to the best approximation of USDA’s purchase plan, in which purchases of commodities are most intensive during the early part of the SY. In order for a CLOC system to have a market impact and remove comparable agricultural surplus, it is necessary for SFAs to have the same relative purchasing capacity during the same time frame in which USDA purchases are being made.

A similar entitlement allocation formula was not adopted for CASH SFAs, because direct SFA purchasing does not correspond to USDA purchasing time frames or targeted commodities.

Disbursement of Entitlement Funds

CASH

CLOC

USDA

20 Purchases

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

CASH Entitlement Utilization

Once in receipt of their commodity entitlement dollars, CASH SFAs have almost complete freedom in determining how these dollars should be spent. The only restrictions imposed upon these sites with respect to expenditure of entitlement money are:

(a) that expenditures have to be related to the operation of school feeding programs

(b) foods purchased have to be of domestic origin.

Because these dollars are generally commingled with all other funds budgeted for food service operations (and, in some cases, with all funds for school district operation), special monitoring for compliance with these two restrictions is very difficult. The use of these funds by SFAs is, of course, subject to established auditing procedures currently a part of the NSLP.

CLOC Entitlement Utilization

Commodity purchases for schools are guided by a procurement plan that reflects USDA’s best estimates of agricultural surpluses and school food program preferences. The CLOC system is intended to match this procurement plan as closely as possible in order to mirror the commodity support to the agricultural markets. Unlike their CASH counterparts, CLOC SFAs are restricted to spending their entitlement dollars on specific agricultural products within a specified time frame.

The linkage between the CLOC system developed by FNS and the procurement plan established by USDA is straightforward. Each time USDA makes a decision to enter a commodity market, details about this pending purchase are promptly forwarded to those responsible for operating the CLOC system. This information includes the type of product expected to be purchased, the anticipated value of the contracts to be awarded (including funds added to cover transportation of goods), and the period within which commodities are to be shipped to designated state distribution points.

Specifications for each letter of credit are established as follows:

1. First, the specific commodity purchased by USDA establishes the general type of product which SFAs can purchase with their entitlement credit. CLOC SFAs are not required to purchase exactly the same product as USDA (e.g., whole turkeys); rather, they are required to purchase products that are composed in whole or in part by the specified agricultural commodity (e.g., turkey breasts, turkey dogs).

2. Second, the total value of USDA’s procurement contracts, including transportation charges, is divided by the value of the entire estimated food procurement plan established by USDA. This calculation results in the percentage of the procurement budget to be allocated to each specific commodity. This percentage in turn is multiplied by each CLOC SFA’s estimated annual

Pe rc en t o f E nt itl em en t commodity entitlement, and the resultant dollar value is the amount of money available to each CLOC SFA toward purchase of that commodity.

Total USDA Procurement Contracts for Commodity

÷ Total USDA Procurement Plan

% Procurement Budget Applied to Commodity

SFA Total Commodity Entitlement × % Procurement Budget Applied to Commodity SFA

Commodity Letter of Credit Value

The second way in which the CLOC system is linked to USDA’s commodity procurement plan is with respect to the period of time allowed for local purchases. The intent is that the time frame for letter of credit purchases will match the time frame for USDA purchases.

This period spans from the time of USDA’s announced intent to enter a particular commodity market until the time a contract is awarded.

For fruits and vegetables, the purchase period is usually slightly longer than 35 days. For commodities purchased on a continuous cycle such as meat and poultry, the purchase period is approximately three

(3) months. This places SFAs in the market at generally the same time that USDA is selecting successful bidders for commodity procurements and gives SFAs a reasonable period of time in which to arrange their letter of credit purchases. Delivery periods for CLOC purchases extend through the last date specified for shipment of USDA donated commodities to designated distribution points.

CLOC Issuance

Well before USDA procures a commodity from the domestic agricultural market, it surveys state agencies to determine the potential demand for that product. At that time, CLOC SFAs receive from the Contractor a CLOC Alert to notify them of USDA’s possible intent to purchase. This prompts the SFAs to examine their own needs related to the specified commodity. The CLOC Alert commits the Contractor to nothing and imposes no obligation on the SFA. For example, when USDA is considering buying apples, the Contractor will notify CLOC SFAs of USDA’s intent to purchase apples with a CLOC Alert, prompting the SFAs to examine their requirements for apple-related products so they are prepared to purchase when USDA does.

Once the state agencies inform USDA of their needs, USDA formally announces its intent to purchase the specified commodity and the amount of the food procurement budget that is allocated for this.

Within two to five days of the bid announcement, SFAs receive a CLOC authorization permitting them to spend up to a corresponding percent of their estimated entitlement on this commodity and related products. For example, if, subsequent to the survey of state agencies, USDA announces its intent to buy apples amounting to 10 percent of the USDA food procurement budget, the CLOC issued for apples will be valued at up to 10 percent of the SFA’s estimated entitlement. A sample CLOC authorization is provided in Exhibit 2.

The CLOC authorization also defines the period within which purchases must be made and the date by which purchased products must be delivered. These two sets of dates rarely coincide; the period for accepting purchases is usually much longer than the period for making purchases. Under the CLOC system, SFAs are required to commit to buy a specified commodity during the same time that USDA is in the market but can select a delivery time that best meets the particular requirements of their food service operations.

In addition to setting spending and time specifications, the CLOC authorization specifies a set of products that are termed full credit items. These are food products that SFAs can pay for completely with commodity entitlement dollars. Such items are usually defined as any product that removes approximately the same amount of a commodity from the market per dollar spent as the commodity form USDA is purchasing. In the apple example, SFAs could use the letter of credit to buy fresh apples, canned apples, apple sauce, apple juice concentrate, etc., and allocate the entire cost of these products to their CLOC accounts.

The flexibility of the CLOC system is further extended by the notion of partial credit. If the SFA wishes to purchase a highly-processed product, they can still receive commodity credit for that element of the processed food item even if it represents a small fraction of the overall food item formulation.

FNS defines the partial credit rate for processed food items according to the proportion of: (a) the average weight of the commodity removed from the market per SFA dollar spent on the product and

(b) the weight of commodity removed from the market per dollar for USDA purchases.

For example, if the SFA wished to purchase apple pie filling with the apple CLOC, they could apply the predetermined commodity percentage (in this case, 50%) per dollar value of the product against the CLOC. Allowing partial credit gives CLOC SFAs as much flexibility as possible in using their commodity dollars while still ensuring support for the same agricultural markets as USDA’s procurement action. Most SFAs use most of their letters of credit for the purchase of full-credit items.

Purchase Amount for Processed Product

× Commodity Percentage for Processed Product CLOC Partial Credit

The other major condition attached to a CLOC authorization is that the product purchased has to be formulated from a target commodity (or commodities) of domestic origin and that final authorization to use entitlement funds to pay for these items depends upon some evidence that the purchase has in fact been made. SFAs must certify that products purchased with CLOCs are grown and produced in the United States, although they are no longer required to obtain documentation from distributors. Further, all products must be processed, packaged, and delivered in accordance with regulations of the USDA and requirements of the Federal Food, Drug and Cosmetics Act and regulations stated therein.

During SY 2019-20, 33 separate CLOC authorizations were issued to each participating CLOC SFA;

as of October 2020, 24 CLOC authorizations have been issued, accounting for 73.63% of SY 2020- 2021 entitlement. Depending on the USDA purchase plan, quarterly authorizations may be issued for commodities such as beef, pork, chicken, turkey, eggs, fish, and grains/oil seeds. These are products that USDA often purchases routinely (at least monthly) during the course of the school year, and, rather than issue a separate letter of credit at the time of each individual USDA purchase, quarterly letters of credit are issued for these products. This simplifies tracking and monitoring of SFA purchases of these commodities (or commodity groups). All other letters of credit are issued in the manner described above per the apple example.

CLOC Monitoring and Accounting SFAs are required to document purchases allocated against their commodity entitlement funds by completing a reporting form, which was designed specifically for the information requirements of the program. An example of this form is provided as Exhibit 3. The form is submitted along with an invoice purchase order or contract to indicate the SFA’s commitment to buy the product in question.

The documentation is reviewed by the Contractor to make sure any purchases listed on the CLOC Reporting Form correspond to accompanying documentation and that these purchases were made within the specified time period. Generally, a decision about whether the purchase is an acceptable transaction is made within three business days. Then, Purchase data are entered in the CLOC database, including total cost of purchase, standardized food description, date of purchase, transaction code, and credited amount. An example of a summary for CLOC tracking is provided in Exhibit 4.

When approved, the purchase value based on full or partial credit as applicable is deducted from the SFA’s entitlement credit and posted to accounts maintained by the Contractor on behalf of FNS. At predetermined intervals, the Contractor provides computer-generated reports of account status to each SFA for review. These reports include a history of all transactions made with respect to each letter of credit as well as a summary of the account status of all CLOCs issued.

A major challenge for the CLOC system is the calculation of predetermined percentages of the total dollar value for partial credit items. Although many of these rates have been calculated in previous years, it is essential that they are reviewed each year to take account of potential changes in market conditions. In addition, new processed products may be available for SFAs to purchase with their CLOC funds, requiring calculation of the appropriate partial credit proportions.

Generally SFAs are asked to obtain the product formulation information from the vendor or the products manufacturer. If an adequate formulation cannot be obtained from industry sources a generic formulation must be developed subject to the review of the SFA. This is used to estimate the amount of a specified commodity ingredient that is removed from the market when an SFA purchases the processed product.

To determine the percentage of the total dollar value of a processed product that can be credited against the CLOC, the following additional information must be available for a specified commodity: (a) an estimate of the farm-equivalent weight3 of USDA purchases, (b) the total dollar amount of USDA purchases, (c) an estimate of the total amount of commodity removed from the market with the SFA purchase, and (d) the total dollar amount of the SFA product purchase. The pounds of commodity removed from the market per dollar spent is calculated by dividing the commodity pounds removed by the total dollar amount of purchase. The SFA dollars per pound ratio is then divided by the USDA dollars per pound ratio to determine the portion of the processed product purchase that would be creditable to the CLOC.

Total SFA Commodity

Pounds Removed (based on product formulation) ÷

Total USDA Commodity

Pounds Removed = USDA Commodity Purchase Total

SFA Processed Product Purchase Total

USDA Commodity Purchase Total

For example, suppose the SFA wished to purchase apple pies for partial credit toward the CLOC, the amount of credit can be determined with the following information:

• USDA removed 850 pounds of apples from market for $350.

• SFA purchased 300 pounds of apple pies for $400.

• Each apple pie contains 50% apples by weight according to product formulation.

• SFA purchase removed 150 pounds of apples from market.

3 Farm-equivalent weight is the weight of a raw agricultural commodity that is required to produce a given unit of a food product containing that commodity. For example, approximately 1.25 pounds of raw apples produce 1 pound of canned applesauce.

150 Lbs (50% of total weight)

$400 ÷ 850 Lbs

$350 = Commodity Percentage for Processed Product

0.375 Lbs per $ ÷ 2.83 Lbs per $ = 13.25%

CLOC Trades

SFAs may trade commodities under the current commodity system.

• If the SFA has accepted delivery of certain commodities for which the district has little or no need, these products may be exchanged with another SFA for a more desirable product mix.

• Trades may even occur across state lines, although trades over long distances are uncommon because of the cost to transport materials.

• Trades are also permissible under the CLOC system. These trades are quite simple to accomplish since they involve only a paper transaction instead of exchanging actual products.

3.0 SCOPE

The purpose of the subject work is to obtain program support services necessary to manage SFA commodity entitlement funds for CASH and CLOC sites and to monitor compliance of purchases under the CLOC Program.

The expected period of performance is January 1, 2021, to December 31, 2021, with a Government option to extend the period of performance by twelve months for the following calendar year (January 1-December 31) for no more than four years beyond the base period.

The Contractor shall serve as a primary point of contact for the CASH and CLOC programs with participating SFAs and shall be responsible for tracking entitlement disbursement, issuing CLOCs, and monitoring CLOC purchases for full or partial credit eligibility. To this end, the Government will provide information but not equipment, software, or other material. Additional information and documentation will be provided to the Contractor by the SFAs.

The place of performance shall be the Contractor’s business office(s) or usual worksites. Travel is not required or expected.

The Contractor will work in conjunction with the Contracting Officer’s Representative (COR) in the Food Distribution Division (FDD), FNS. All references to “Government” below refer to the COR or a designated alternate from FDD.

Government Responsibilities

Decisions about NSLP purchase of domestic commodities from agricultural markets are a collaborative effort between FNS and the Agricultural Marketing Service (AMS). These USDA agencies jointly prepare an annual Purchase Plan, which identifies what food commodities will be purchased and how much of the annual entitlement spending (percentage of total) will be applied toward each product.

These purchased commodities are donated by the Government to SFAs in support of the NSLP per value of entitlement.

SFAs who participate in the CLOC system are provided an opportunity to purchase the same commodities as USDA with a voucher (otherwise referred to as a Commodity Letter of Credit or CLOC). The maximum value of the voucher is a percentage of the available entitlement dollars for the SFA, which corresponds to the percentage of USDA’s Purchase Plan to be applied toward that commodity.

The Government will provide a copy of the Purchase Plan to the Contractor within five

(5) business days of award of contract or at the start of an option year. If there are subsequent changes to the Purchase Plan, the Government will provide a copy of these modifications on or before the first day of the next quarter.

Within five (5) business days after contract award or at the start of an option period, the Government will provide a list of estimated total entitlement dollars for each SFA for the current SY to the Contractor for the purpose of estimating CLOC values. These entitlement amounts are calculated from the previous SY’s meal count, which is reported by SFAs, and the current rate for value of donated food assistance.

Each quarter, the Government will update or confirm entitlement values for CASH and CLOC SFAs.

The third and fourth quarter entitlement estimates will include a meal count adjustment to reflect the difference between prior year meals (reported in November of current SY) and meal count reported in previous year. Quarterly estimates may also be impacted by changes to the per meal commodity rate, which is impacted by annual changes to the Price Index for Food Used in Schools and Institutions, and must contribute at least 12% of the total entitlement dollars received by the SFA.

The Government will issue quarterly entitlement payments to SFAs.

SFAs are responsible for providing annual meal counts, purchase receipts and completed CLOC Reporting Forms for compliance and monitoring purposes, close-out documentation at end of SY, and updates to banking or contact information as appropriate.

4.0 APPLICABLE DIRECTIVES

The Contractor shall monitor compliance with procedures established for the Demonstration of Alternatives to Commodity Donation as set forth in the document entitled “Demonstration Procedures” (February, 1982) (Attachment I) and subsequent amendments as set forth in the document entitled “Changes in Operational CLOC Procedures SY 90-91” (May, 1990) (Attachment II).

5.0 PERFORMANCE REQUIREMENT SUMMARY

The Contractor shall be responsible for the following tasks related to Managing Operations, Record Keeping, CASH/CLOC Administration, and Progress Reporting.

5.01 MANAGING OPERATIONS

• Manage work assignments to support CASH and CLOC programs according to the specifications outlined in this Performance Work Statement and the financial terms of the contract. Support staff may be hired, assigned, or reassigned at the discretion of the Contractor, who shall inform the Government of changes.

• Prepare and/or conduct formal training for employees to ensure they will have the required knowledge for monitoring the CASH/CLOC program and providing support to SFAs. At minimum, this should include a CASH/CLOC program overview, operating procedures, equipment/software use, and customer service guidance.

• Provide an Employee Roster (Deliverable 1) with name(s), contact information, and primary area(s) of responsibility for each employee assigned to support the CASH/CLOC activities to the Government within thirty (30) calendar days of contract award. This may also include other relevant information at the Contractor’s discretion. Updates to the Employee Roster shall be provided to the Government within 30 days of any staffing changes.

• Create and/or revise Standard Operating Procedures (SOP) to document how the Contractor will monitor and provide program support for CASH/CLOC. This shall incorporate internal operations and SFA interactions. The new Contractor shall submit a Draft SOP (Deliverable

2) to the Government for review within thirty (30) calendar days of contract award. Upon receiving feedback from the Government, the Contractor shall submit a Revised SOP (Deliverable 3) for approval within ten (10) calendar days.

• Review and update SOPs on a regular basis. The Contractor shall review operations at least annually and update the SOP to reflect the most current methods and any process improvements. Within thirty (30) days of the end of each contract year, the Contractor shall provide the Government with a Current SOP (Deliverable 4). If there have been no changes, the Contractor shall inform the Government in lieu of providing a Current SOP.

5.02 RECORD KEEPING

• Maintain electronic record keeping system to track CLOC allocations, purchases, trades, refusals, rollovers, and substitutions; track meal counts; and track changes to SFA contact and banking information.

• Document the organization and file structure of the electronic record keeping system. This should accompany data files provided to the Government. System documentation shall include the following:

o Explanation of file structure such as data set name, record format, record length, block size, and number of records;

o Data code book including variable names, variable format, variable labels, value labels, and missing values; and o Formulas for any calculated variables.

• Provide Government with a copy of all files, tracking records, and other program-related documentation annually for the SY Close-Out Records (Deliverable 5).

5.03 CASH/CLOC ADMINISTRATION

• Request meal counts from SFA for tracking. Report the annual Summary of Meal Count Data (Deliverable 6) to Government.

• Calculate maximum reimbursement for CLOC SFAs for each eligible commodity or commodity group by applying the proportion of purchases for each commodity or commodity group under the annual USDA Purchase Plan to each SFA’s commodity entitlement for that SY. The Government will review and approve the CLOC value available to SFAs.

• When USDA is considering buying additional commodities, the Government directs the Contractor to inform SFAs of a possible opportunity to purchase. This CLOC Alert notification provides general information about the commodity or commodity group without obligation to buy, so the SFA can examine their product needs in advance of CLOC opportunities.

• Issue letters of credit to CLOC SFAs:

o When a commodity or commodity group is available for purchase by USDA, the

Government directs Contractor to issue a CLOC to participating SFAs. Per the process outlined in Attachments I and II, the CLOC should inform the SFA of the following:

(a) the commodity or commodity group to be purchased, (b) how much to spend, (c) the purchase and delivery dates, (d) a list of full credit items, and (e) instructions for partial credit items.

o When there are changes to the Purchase Plan, the Contractor shall issue revised CLOCS as soon as notified by the Government.

o Provide the pre-approved list of partial credit products and corresponding percentage values to an SFA upon request.

• Document and track all CLOC purchases upon receipt of all required SFA documentation throughout the SY. It is expected that the majority of purchasing will occur in the first half of the SY.

o Review completed CLOC Reporting Forms received from SFAs to confirm eligibility of commodity and reimbursable value of purchase before releasing CLOC to SFA.

o Review values to ensure partial credit has been applied appropriately for SFA-purchased food products that partially contain the CLOC commodity.

o Calculate partial credit for any new products, which do not have a pre- approved rate, according to the product formulation and USDA purchase cost per pound for the related commodity. Submit new partial credit rates and product information to the Government for approval before releasing the CLOC to the SFA.

• Monitor CLOC spending in order to provide support to SFAs throughout the SY and report through regular progress reports and the annual Summary Statement of Final Account Balances for All CLOC Sites (Deliverable 7).

5.04 PROGRESS REPORTING

• Submit a Monthly Progress Report (Deliverable 8), per the following:

452.237-76 Progress Reporting (FEB 1988) The Contractor shall submit a progress report Monthly, covering work accomplished during that period of the contract performance. The progress report shall be brief and factual and shall be prepared in accordance with the following format:

(a) A cover page containing:

(1) Contract number and title;

(2) Type of report, sequence number of report, and period of performance being reported;

(3) Contractor's name and address;

(4) Author(s); and

(5) Date of report.

(b) SECTION I - An introduction covering the purpose and scope of the contract effort. This shall be limited to one paragraph in all but the first and final month's narrative.

(c) SECTION II - A description of overall progress plus a separate description of each task or other logical segment of work on which effort was expended during the report period. The description shall include pertinent data and/or graphs in sufficient detail to explain any significant results achieved.

(d) SECTION III - A description of current technical or substantive performance, and any problem(s) which may impede performance along with proposed corrective action.

(e) SECTION IV - A planning schedule shall be included with the first progress report for all assigned tasks required under the contract, along with the estimated starting and completion dates for each task.

The planning schedule shall be updated and submitted with each subsequent technical progress report, including an explanation of any difference between actual progress and planned progress, why the differences have occurred, and--if behind planned progress--what corrective steps are planned.

(f) SECTION V - If applicable, financial information shall be submitted for each major task or line item cost.

(g) Data shall include:

(1) The total estimated cost budgeted (fee excluded).

(2) The estimated cost expended during the current reporting period.

(3) Identification of direct labor hours of prime contractor and subcontractor(s) and/or consultant(s), if applicable.

(4) Total project to-date expenditures.

(5) Total remaining funds

(End of Clause)

5.1 TRANSITON

In the event that a new Contractor receives the award, careful preparation will ensure a smooth transition with minimal impact on SFAs. Both the incoming and incumbent contractors shall engage in planning and knowledge sharing activities. Additionally, they will coordinate with the Government to facilitate data transfer from one system to another.

6.0 DELIVERABLES

Item

Deliverable Section Format/Quantity/Recipient Due Date

1 Employee Roster 5.01 Email/1 Copy/COR 30 calendar days from award 2 Draft SOP 5.01 Email/1 Copy/COR 30 calendar days from award 3 Revised SOP 5.01 Email/1 Copy/COR 10 calendar days from receipt of Government feedback

4 Current SOP 5.01 Email/1 Copy/COR June 1 or whenever a revision is made mid-year

5 SY Close-Out Records 5.02 CD or File Transfer/1 Copy/

COR

June 30 or 5 business days from receipt of SFA documentation, whichever is later

6 Summary of Meal Count Data

5.03 Email/1 Copy/COR December 31

7 Summary Statement of Final Account Balance for All CLOC Sites

5.03 CD or File Transfer/1 Copy/

COR

June 30 or 5 business days from receipt of SFA documentation, whichever is later

8 Monthly Progress Report

5.04 Email/1 Copy/COR 10th of following month

7.0 PERFORMANCE REQUIREMENT SUMMARY

Deliverables will be reviewed for quality assurance according to the following table. In the event Acceptable Quality Level is not met, this may result in a negative performance evaluation and/or withholding of payment until the missing or revised document or data is accepted by the Government.

Item

Deliverable Performance Standard

Acceptable Quality Level Method Used

Frequency

1 Employee Roster Document contains all required information and is submitted on time.

Document is received within the specified time period. All information is current and accurate.

Review of Document

Once (Transition-In)

2 Draft SOP Document is submitted on time.

Document is received within the specified time period.

Review of Document

Once (Transition-In)

3 Revised SOP Document incorporates Government feedback and is submitted on time.

Document is received within the specified time period.

100% of Government feedback has been addressed through changes to document or comments.

100% Inspection of Changes

Once (Transition-In)

4 Current SOP Document is submitted on time or Government notified of no changes needed by due date.

Document or notification of “no changes” is within the specified time period.

Review of Document

Annual

5 SY Close-Out Records

Data is complete, on time, and uses an appropriate electronic format. Documentation for all CASH/CLOC activity is present and supports year-end reports for each SFA.

No more than 10% of data received later than the specified time period. Files can be accessed by the Government. Documentation supports year-end account summaries for SFAs.

Review of CD/File(s);

Random Testing for no fewer than 3 SFAs

Annual

6 Summary of Meal Count Data

Data is complete and on time.

No more than 10% of data received later than the specified time period.

100% Inspection of Data

Annual

7 Summary Statement of Final Account Balance for All CLOC Sites

Report is complete, in appropriate format, and on time.

No more than 10% of report data is received later than the specified time period. Report contains all required data.

100% Inspection of Report

Annual

8 Monthly Status Report

Report is complete, in appropriate format, and on time.

No more than 10% of report data is received later than the specified time period. Report contains all required data.

100% Inspection of Report

Monthly

EXHIBIT I: COMPARISON OF OPERATIONAL FEATURES

POPERATIONAL

FEATURE

COMMODITY DONATION

PROGRAM

COMMODITY LETTER OF

CREDIT (CLOC)

Purchasing Agent • Central decision-making by

USDA

• USDA purchases based on reported needs from States

• Combined central and local decision- making by USDA and local school district

• School Food Authority (SFA) purchases

Form of Commodity • School district receives USDA Foods through State Distributing Agency (SDA)

• CLOCs issued by USDA at various times throughout the school year

• SFA receives products ordered with CLOC

Level of Support Calculation

• Entitlement earned by State at annual meal rate per eligible National School Lunch Program (NSLP) meal served

• School district receives prorated share of USDA Foods delivered to State

• SY2015 meal rate: $0.3044

• Entitlement earned by SFA at annual meal rate per eligible NSLP meal served

• School district receives CLOCs to purchase commodities equal to entitlement

• SY2015 meal rate: $0.3044

Frequency of Receipt

• Periodic deliveries of commodities

• Schedule varies by State and commodity

• CLOC issuance and cash advance tied to USDA purchase plan

• 36% first quarter, 36% second quarter, 21% third quarter, 7% fourth quarter

Restrictions • Commodities received by State in form acquired by

USDA

• Commodities may, at State’s discretion, be processed into more usable forms

• Time of deliveries determined by State orders, USDA delivery schedules, and intra- State distribution system

• CLOCs apply to food products containing the stated commodity in whole or in part

• Value charged against CLOC limited to value of the specified commodity ingredient

• Must be used within stipulated time period

• Products must be of domestic origin

Bonus Commodities • School districts can order “as much as can be used without waste”

• Delivery through SDAs

• Schools districts can order “as much as can be used without waste”

• Delivery through SDAs

EXHIBIT II: Sample Commodity Letter of Credit (CLOC)

Food and Nutrition Service CLOC No.: E-330-059-25 Department of Agriculture Commodity Donation Demonstration Date of Issue: 10/01/14

Commodity Letter of Credit for the purchase of SWEET CORN

Issued to:

School District Name In the amount of:

$269 To be purchased no later than: To be delivered no later than:

03/31/15 6/30/15 You are authorized to purchase this commodity in amounts up to the dollar limit noted above. On receipt of a satisfactory proof of purchase, your account will be credited for the amount of the purchase or that part of the purchase meeting the requirements noted below.

Full credit, up to the limit noted above, will be made on the following products: Fresh Corn on the Cob Canned Whole Kernel Corn Frozen Whole Kernel Corn Frozen Corn Cobettes Fresh Fruits and Vegetables

Partial credit will be given for some processed products. The amount of credit allowed for such end products will be a preassigned percentage of the total product cost. This percentage will be the ratio of:

1) the weight of the commodity removed from the market per district dollar spent and 2) the weight of commodity removed per U.S. Department of Agriculture dollar spent.

To qualify for credit, the product must be composed only of targeted commodities produced in the United States. All products shall be processed, packaged and delivered in accordance with regulations of the U.S. Department of Agriculture and requirements of the Federal Food, Drug and Cosmetics Act and regulations stated therein.

For further information regarding the proper use of Commodity Letters of Credit, call the CLOC Project at (800) xxx-xxxx between the hours of 9:00 A.M. and 2:00 P.M. (Eastern Time Zone), Monday through Friday.

This is Not Negotiable

EXHIBIT III: SAMPLE CLOC REPORTING FORM

COMMODITY NAME: DISTRICT NAME:

CLOC NO.: PURCHASE PERIOD: / / THROUGH / /

I CERTIFY THAT THE PRODUCTS CLAIMED BELOW ARE, TO THE BEST OF MY KNOWLEDGE,

OF DOMESTIC ORIGIN AND WERE ORDERED DURING THE PURCHASE PERIOD, SPECIFIED

ABOVE.

DISTRICT REPRESENTATIVE: DATE: / /

1. PRODUCT

DESCRIPTION

2. VENDOR

3. MONTH/YEAR OF

ORDER

4. TOTAL COST

5. PERCENTAGE

CREDIT

6. TOTAL CLAIMED

(4X5)

APPROVAL: YES NO YES NO YES NO YES NO

1. PRODUCT

DESCRIPTION

2. VENDOR

3. MONTH/YEAR OF

ORDER

4. TOTAL COST

5. PERCENTAGE

CREDIT

6. TOTAL CLAIMED

(4X5)

APPROVAL: YES NO YES NO YES NO YES NO

REVIEWED BY: DATE REVIEWED: / /

EXHIBIT IV: SUMMARY OF CLOC ENTITLEMENT EXAMPLE

Summary of Entitlement Letters of Credit 6/30/2015

School District Name: Apple Valley Public Schools

Total Entitlement for the Year: $75,873

Total Checks Received: $75,873

Total Amount of CLOCs Used: $75,873

CLOC

Number

Commodity

Issue Date

Purchase Date

Delivery Date

Value

Adjustment

Balance

% Used

E‐004‐051‐15 OPEN‐ORDER 07/01/14 06/30/15 06/30/15 $4,275 $0.00 100.0%

E‐004‐051‐25 OPEN‐ORDER 07/01/14 06/30/15 06/30/15 $4,510 $0.00 100.0%

E‐004‐051‐35 OPEN‐ORDER 07/01/14 06/30/15 06/30/15 $3,705 $0.00 100.0%

E‐004‐051‐45 OPEN‐ORDER 07/01/14 06/30/15 06/30/15 $1,202 $0.00 100.0%

E‐011‐051‐15 DRY BEANS 07/01/14 12/31/14 03/31/15 $605 $0.00 100.0%

E‐011‐051‐25 DRY BEANS 10/01/14 03/31/15 06/30/15 $108 $0.00 100.0%

E‐012‐051‐15 EGGS 07/01/14 12/31/14 03/31/15 $566 $0.00 100.0%

E‐012‐051‐25 EGGS 10/01/14 03/31/15 06/30/15 $112 $0.00 100.0%

E‐015‐051‐15 CHICKEN 07/01/14 12/31/14 03/31/15 $6,378 $0.00 100.0%

E‐015‐051‐25 CHICKEN 10/01/14 03/31/15 06/30/15 $4,472 $0.00 100.0%

E‐015‐051‐35 CHICKEN 01/01/15 06/30/15 06/30/15 $988 $0.00 100.0%

E‐017‐051‐15 TURKEY 07/01/14 12/31/14 03/31/15 $3,733 $0.00 100.0%

E‐017‐051‐25 TURKEY 10/01/14 03/31/15 06/30/15 $700 $0.00 100.0%

E‐017‐051‐35 TURKEY 01/01/15 06/30/15 06/30/15 $122 $0.00 100.0%

E‐141‐051‐15 BEEF/PORK 07/01/14 12/31/14 03/31/15 $12,445 $0.00 100.0%

E‐141‐051‐25 BEEF/PORK 10/01/14 03/31/15 06/30/15 $6,368 $0.00 100.0%

E‐141‐051‐35 BEEF/PORK 01/01/15 06/30/15 06/30/15 $2,412 $0.00 100.0%

E‐188‐051‐15 FISH 07/01/14 12/31/14 03/31/15 $373 $0.00 100.0%

E‐200‐051‐15 APPLES 07/01/14 12/31/14 03/31/15 $1,229 $0.00 100.0%

E‐200‐051‐25 APPLES 10/01/14 03/31/15 06/30/15 $598 $0.00 100.0%

E‐202‐051‐15 APRICOTS 07/01/14 12/31/14 03/31/15 $198 $0.00 100.0%

E‐202‐051‐25 APRICOTS 10/01/14 03/31/15 06/30/15 $124 $0.00 100.0%

E‐206‐051‐15 BLUEBERRIES 07/01/14 12/31/14 03/31/15 $152 $0.00 100.0%

E‐210‐051‐15 TART CHERRIES 07/01/14 12/31/14 03/31/15 $122 $0.00 100.0%

E‐230‐051‐15 ORANGES 07/01/14 12/31/14 03/31/15 $185 $0.00 100.0%

E‐230‐051‐25 ORANGES 10/01/14 03/31/15 06/30/15 $135 $0.00 100.0%

E‐234‐051‐15 PEACHES 07/01/14 12/31/14 03/31/15 $1,777 $0.00 100.0%

E‐234‐051‐25 PEACHES 10/01/14 03/31/15 06/30/15 $1,372 $0.00 100.0%

E‐238‐051‐15 PEARS 07/01/14 12/31/14 03/31/15 $1,257 $0.00 100.0%

E‐238‐051‐25 PEARS 10/01/14 03/31/15 06/30/15 $726 $0.00 100.0%

E‐250‐051‐15 STRAWBERRIES 07/01/14 12/31/14 03/31/15 $1,393 $0.00 100.0%

E‐250‐051‐25 STRAWBERRIES 10/01/14 03/31/15 06/30/15 $825 $0.00 100.0%

E‐304‐051‐15 GREEN BEANS 07/01/14 12/31/14 03/31/15 $321 $0.00 100.0%

E‐304‐051‐25 GREEN BEANS 10/01/14 03/31/15 06/30/15 $236 $0.00 100.0%

E‐314‐051‐15 BROCCOLI 07/01/14 12/31/14 03/31/15 $346 $0.00 100.0%

E‐314‐051‐25 BROCCOLI 10/01/14 03/31/15 06/30/15 $200 $0.00 100.0%

E‐320‐051‐15 CARROTS 07/01/14 12/31/14 03/31/15 $166 $0.00 100.0%

E‐330‐051‐15 SWEET CORN 07/01/14 12/31/14 03/31/15 $430 $0.00 100.0%

E‐330‐051‐25 SWEET CORN 10/01/14 03/31/15 06/30/15 $269 $0.00 100.0%

E‐360‐051‐15 SWEET POTATOES 10/01/14 03/31/15 06/30/15 $287 $0.00 100.0%

E‐364‐051‐15 GREEN PEAS 07/01/14 12/31/14…