Best Practices for USDA Bid Process

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With tight budgets and tightening regulations, K-12 foodservice directors certainly have their hands full. And with regulations pushing schools to serve healthier, fresher foods, increases to  labor and food costs are a fear of many. An important budget relief element, the USDA Food Distribution Program, formerly referred to as ‘commodities’, plays a key role in managing food costs for schools participating in the National School Lunch Program. 

Accounting for 15 to 20 percent of federal school lunch expenditures, the availability of USDA Foods allows schools to purchase a wide variety of foods – from dairy and lean meat products to fresh fruit and vegetables – by utilizing entitlement dollars. This frees up funds that would otherwise be spent toward the purchase of commercial food products.

Sounds simple, but there are challenges and factors to consider as you choose how to make the most of the funds your foodservice program receives through the USDA Food Distribution Program. 

Behind the Scenes: How the USDA Food Distribution Program Works

Although the USDA Food Distribution Program is a federally-managed program, state agencies – often referred to as Distributing Agencies (DA) – also play a large part. The program is administered at the state level according to USDA guidelines; each state agency is responsible for a contract with each processor that participates in the USDA Food Distribution Program in their state. Processors must have their items approved by USDA, which are reflected on an Summary End-Product Data Schedule, or SEPDS. This is required for each item that the processor would like to include in the USDA Foods Program.

School Food Authorities (SFA), or Recipient Agencies (RA) then select which eligible, USDA-approved products they will choose from throughout the year.

The first step in this process is determining which products meet your school’s menu needs. Depending on the state, schools may choose to allocate PAL dollars to: Processed, non-processed (sometimes referred to as ‘brown box’ or direct delivered), and/or – if allowed in their state –  Department of Defense (DoD) Produce Program.

Next, state agencies provide each RA with their entitlement dollars for the next school year. This is referred to as a PAL (planned assistance level) account. This represents the amount each school district may spend within the USDA Foods Program. 

Making the Most of Your PAL Dollars

Here are some important factors to consider when choosing the products that best fit the needs of your program and the needs of the students. 

For Whom You’re Cooking 

Student preferences play a big part in which products you select. Keep the students you serve in mind. Ask what they want and don’t assume you know.  Look at top favorite recipes and products, and consider how it fits into your program.

What and How You Cook

Another thing to consider is the type of products that work best for your operation. For example, a foodservice program with the labor and preference to cook from scratch would purchase a different group of products than a school who prefers to serve ‘heat and eat’ products, such as prepared chicken fajita strips or prepared mac ‘n’ cheese. 

Where You Cook

Your kitchen itself plays a big role in which products will work best for your program. The equipment you have, the storage space, and the size of your kitchen are all factors that affect what kind of food can be realistically prepared in your school, thus, affecting what you purchase. 

The Size of Your Foodservice Program

In addition to the number of students a foodservice program serves, the number of staff, food budget, and labor budget are all important factors to consider when choosing your products. 

Becoming a Better Buyer

The journey doesn’t end at choosing the right products. After that, it’s important to spend wisely. Not maximizing USDA Foods Program money is a mistake made by many foodservice programs. “Some schools get their allowance and spend it like free money. But it’s still money,” says Mark Morrison, Gordon Food Service U.S. National Education Sales Manager. “Better managing your USDA Food Program dollars means a healthier bottom line for your school’s program.”

Become a better buyer by comparing the price – and value – of USDA Foods to commercial products. When purchasing USDA processed items, it’s important to consider the cost of the USDA Food ingredients, the cost of processing the ingredient, and the cost of getting the finished product to your school compated to your Commercial Bid Price. When considering direct delivered (brown box) items, it’s important to compare the USDA cost against your commercial bid cost plus any applicable storage fees to determine whether direct delivered product offers the best value for your school. “Sometimes the extra spend on a higher-quality product that does better with students is worth it.” Morrison advises.   

The Final Word

While there seems to be an endless number of factors to consider, it can be difficult to know where to start. Begin with your state agency to determine what your options are. If your school still isn’t quite sure where to go from there, consider talking to schools with programs similar to yours in your state. They can offer insight into what works for them and how to avoid common pitfalls. You can also talk with your CDS to help advise you with what the best practices would be for your operation.

For additional information, including how to locate state DA contact, visit

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