Alright, you need to purchase something for the School Nutrition Program and are trying to figure out what you need to do to be compliant. One of the key steps is to choose a procurement method (sometimes called “purchase method”).
Procurement Methods
There are three types of procurement methods:
Micro Purchase: this is where you just go and buy the darn thing. It’s the most informal method because there are no price comparisons or documents to put together. However, there are a few rules around micro purchases, so check out more details in my article on The Rules of the Micro Purchase (with Examples!).
Small Purchase: this is where you obtain quotes before making a purchase. It is also considered an informal method of procurement because there are far less hoops to jump through than the formal methods. More information can be found in my article on How to Complete a Small Purchase.
Formal Procurement Methods: this includes both invitation for bids (IFB) and requests for proposals (RFP). In this method, vendors submit their bids or proposals to you, and you open them all at one time to evaluate who wins. What’s more, there are more documents to put together and processes you have to follow. Consequently, it takes the most time and effort, but it usually results in the best pricing. I go into more detail on these methods in my article titled Steps in a Formal Procurement.
So, which procurement method do you need to use?
Deciding which procurement method to use is determined by local, state, and federal purchasing thresholds. The purchasing threshold is the maximum amount that you can spend on a purchase without triggering more formal procedures. 
Let me ask you this, if dad says you can do something, but mom says you can’t, can you do it?
If you answered “yes”, then I’m guessing you’ve probably been confused with purchasing thresholds at some point. That’s because you’re naturally wired to only seek one authority’s permission to do something. In government, the answer would have been “no”.
School nutrition programs in public schools have to follow local, state, and federal laws, and they have to be compliant at all levels.
So, if local and state regulations say you can do something, but the federal government says you can’t, then you can’t. You have to get a “yes” from all three levels for it to be allowable.
This is true with all regulations and policies, so it applies to purchasing thresholds as well. You’ll often hear the USDA or your state agency say that you have to follow the “most restrictive” purchasing threshold, and this is what they mean.
Let’s look at an example.
Let’s say you anticipate buying $200,000 of produce with a produce distributor in a year.
The federal government says you can buy it with quotes because it’s under $250,000.
But if your state says you can only do quotes if it’s under $50,000, then you can’t do quotes for this $200,000 purchase because it exceeds the state threshold. In other words, you do not have a “yes” from all levels of government to procure this produce with quotes.
Local boards and government bodies also set thresholds, so you have to check what your local limit is too.
Where I work for example, both the federal and state allow micro purchase methods for anything up to $10,000. However, our district’s board policy only allows micro purchasing up to $2,500, so I have to follow the $2,500 threshold. Womp womp.
If you’re unsure what your local thresholds are, someone in your purchasing or finance department should be able to tell you.
Aggregate Purchases
When estimating the cost of the purchase to determine which method you should use, you have to estimate the aggregate cost. The aggregate cost is the total amount you will spend.
But here’s where it gets tricky. The “total amount” is sometimes interpreted differently by different states.
Procurement Method: Aggregating Micro Purchases
Most states advise that the aggregate amount for micro purchases applies to each transaction.
However, the definition of “transaction” differs from state to state. For example, Texas defines it as the amount of the invoice, while South Dakota defines it as the amount of the payment (which might include more than one invoice).
Additionally, some states have more restrictions, where they either encourage or require small or formal methods if the aggregate for the whole year exceeds the micro purchase threshold. It’s best to check with your state if you are unsure what they require.
For example, let’s say you spend $2,000 per month on produce, which amounts to $20,000 for the year. As long as you are purchasing produce from all available vendors, most states say that you can use micro purchasing for this because each transaction is below the $10,000 micro purchase threshold.
However, some states will say that because you knew you would spend >$10,000 for the year, you should have done quotes or a bid.
But before you whine at your state agency for the inconsistencies, remember that there may be state laws that are more restrictive than the federal requirement. By all means, this could be the reason you can’t do something that other states allow.
Procurement Method: Aggregating Small Purchases
On the other hand, when we look at small vs. formal purchases, the majority of states no longer let you look at each transaction. Instead, they require you total the estimated purchases for the whole school year.
For example, if you get quotes every time you need equipment repair, most states require that if the total of all the repairs is going to exceed your small purchase threshold, you need to do a formal method of procurement.
You can’t intentionally split purchases just to be below a threshold either.
For example, let’s say you need to replace two pass-thru coolers at a school. Each cooler will cost $9,200.
In that case, you can’t use micro purchase methods to buy one, then turn around and buy another a few weeks later.
In this scenario, you went into it knowing the aggregate cost for the transaction was going to be $16,400 and intentionally split it to avoid getting quotes.
What if you didn’t know it was going to exceed a threshold?
If it was just a lack of adequate planning, then you’re out of compliance.
For example, you need new printers so you ask someone on your team to order one for each school from Amazon. You don’t realize until you get the invoice that you exceeded the micro purchase threshold. Consequently, you’re out of compliance.
Let’s look at another example.
Let’s say you usually get quotes for grease trap cleaning because you’re able to squeak in just under the small purchase threshold each year.
However, a new school with a new kitchen opened in your district this year. This is going to add another grease trap fee to your expenses and push you over the small purchase threshold. Therefore, if you just do what you usually do and get quotes, you will be out of compliance.
You should have planned for this ahead of time because you knew you were getting another school that would increase your expenses.
If it were just something you couldn’t anticipate, then you should be fine.
For example, if you use micro purchase methods to replace one pass-thru cooler at $9,200, then another pass-thru cooler goes down later in the year, then what?
Therefore, you couldn’t have known that would happen, and you weren’t intentionally splitting the purchase.
I know your next question is, “can you use micro purchase methods to purchase the second cooler, or do you now need to use small or formal methods?”
Check with your local and state agency.
Since my state defines this as a separate transaction, they would allow another micro purchase. But my local government wouldn’t allow me to do it, since I’m now over the threshold for the whole year for cooler equipment. In other words, my local board is more restrictive.
Can I use a more formal method if I want?
Sure.
Kind of like you would only ever serve Princess Kate a meal on fine china, but you can serve your own family pizza on paper plates or a fancy meal on fine china.
When formal methods are required, you have to use formal methods. However, for smaller purchases, you can choose to use informal or formal methods.
Especially if you work in a state that uses a high threshold for formal procurement, there will be situations where you find you can save money by going with a more formal method than what you’re required to do.
It’s perfectly fine to do the more formal method if you think it’s in the best interest of your program!
A couple of examples:
- You are looking to buy a new double deck oven that looks to cost around $6,000, which is under your micro purchase threshold. Accordingly, you can still contact multiple equipment brokers/vendors for quotes to ensure you’re getting the best pricing. As long as you can wait a couple weeks to put in the order, getting quotes for something like this is really in your best interest.
- You estimate pest control will cost $20,000 for the year, which is under your small purchase threshold. Subsequently, you can still do a formal RFP in order to get proposals from several exterminators. This will let you evaluate them based on both the services they provide and their cost.
State Thresholds
Each state can set their own set of thresholds. Just remember you need to follow the most restrictive one. Furthermore, these state thresholds apply to public schools, including charters, but typically not private schools. Don’t forget to check if your local government or board has a more restrictive threshold.
Private schools participating in the National School Lunch Program are receiving federal dollars. Consequently, they have to follow the federal procurement thresholds for School Nutrition-related expenses. The federal purchasing thresholds are set by the Federal Acquisition Regulations. Since they are not receiving state education money, they do not have to follow most state-specific procurement regulations.
Summary
Before deciding which procurement method you will use, you must determine what your state and local thresholds are AND how they define aggregate purchases.
Now go forth and buy!
