Learn Institutional Procurement Basics

Public Institutions

Public institutions are institutions that operate their food services using government funding. These institutions include federal and state agencies, local government offices, public school districts, early childhood education centers, public universities, senior and assisted living facilities, correctional institutions, hospitals, and any other government-funded institutions. [1] To help ensure taxpayer funds are used efficiently, whenever a public institution engages in food procurement, specific federal, state, and/or local laws and processes apply. Because applicable laws vary by public institution type, level of government, and location, public institutions that incorporate values-based procurement must consult closely with their legal and procurement/purchasing teams.

Federal Procurement Laws

Procurement by federal executive agencies is governed by the Federal Acquisition Regulations (FAR).[2] Procurement by institutions receiving federal awards and funding is governed by Part 200 of Title 2 in the Code of Federal Regulations, commonly referred to as the “Uniform Guidance.”[3] Specifically, Sections 200.317-326 in Title 2 of the Code of Federal Regulations set forth requirements for states, tribes, and institutions conducting procurement transactions with a federal award.[4] There is substantial cross-over and cross-references between the FAR and the Uniform Guidance to promote aligned standards and requirements.

When a public institution wants to purchase food or food service, it must issue a solicitation describing what it needs. The formality of the solicitation process is dictated by the specifics of the transaction, but the central goal of all federal procurement law is to promote full and open competition.[5] In solicitations, public institutions cannot:

• Set unreasonable requirements;
• Seek unnecessary experience;
• Narrow bid specifications to limit competition too much;
• Specify only brand names;
• Allow organizational conflicts in decision-making;
• Permit a potential contractor to influence or contribute to the solicitation; or
• Make arbitrary decisions. [6]

Generally, public institutions have two options for how they conduct procurement solicitations, depending on the value of the contract: formal and informal procurement. 

Formal Procurement

When a transaction exceeds $250,000, an institution must use formal procurement procedures. [7] There are two types of formal procurement at the federal level: sealed bids and requests for proposals (“RFPs”). [8]

Sealed Bids: Also called invitations for bids, sealed bids require an institution to select a bid based solely on cost. [9] No negotiation of price or terms is permitted, and a firm-fixed-price contract is awarded to the responsive (meets the solicitation requirements) and responsible (capable of successfully performing) bidder with the lowest price. [10] Sealed bids are most frequently used when the good or service being sought is easily definable, and it is not necessary to discuss bids with bidders. [11] Additionally, when a federal agency or institution receiving federal funds knows they will need a large amount of a certain item, but the exact amount and timing of the need is unknown, the institution can issue an invitation for bids for an indefinite delivery, indefinite quantity (IDIQ) contract. [12]

RFPs: Requests for proposals require an institution to issue public notice of the solicitation. After evaluating bids, the award must still go to a responsive (meets the solicitation requirements) and responsible (capable of successfully performing) bidder. [13] Unlike the sealed bid process, the RFP process allows consideration of factors beyond lowest cost, [14] as long as the selection criteria are clearly defined. [15] RFPs are the most commonly used method by public institutions when selecting a food service management company.

Informal Procurement

Generally, public institutions have two options for how they conduct procurement solicitations, depending on the value of the contract: formal and informal procurement.[16] While there are still some legal requirements for informal procurement, it does not require public advertisement, so there is a greater opportunity to reach out directly to vendors that meet values-based food purchasing criteria. Note that many state and local governments have thresholds lower than the federal threshold, so state and local public institutions must check applicable laws to determine the procurement procedures. [17] Institutions are required to comply with the most restrictive applicable rule. 

Informal procurement methods include micro-purchases and simplified acquisitions:

Micro-Purchases: The federal micro-purchase threshold is $10,000 per transaction. [18] Public institutions also have the option to “self-certify” that they qualify for a higher micro-purchase threshold of $50,000. To self-certify, the institution must justify its certification, clearly identify the threshold, and provide supporting documentation. [19] Justifications for certification include qualifying as a low-risk auditee, demonstrating some form of financial risk mitigation, and showing that a higher threshold exists in state law. [20] For micro-purchases, an institution can go straight to a vendor, discuss a reasonable price, and document the purchase. [21] Federal law requires that micro-purchases be distributed equitably among qualified suppliers, meaning institutions should make an effort to work with different vendors. [22]

Simplified Acquisition: Federal law sets the simplified acquisition, or “small purchase,” threshold between the micro-purchase threshold ($10,000) and the formal procurement threshold ($250,000). [23] For simplified acquisitions, an institution can reach out directly to vendors with a verbal or written solicitation. [24] The institution must acquire a price quote from an “adequate” number of bidders. [25] The definition of “adequate” can vary by agency, and an institution may be able to exercise judgment about how many bids are adequate. [26] While the process is flexible, an institution must state whether it will consider price alone or price and other factors, but not necessarily how each factor will be weighted. [27] Additionally, though institutions may consider factors beyond cost, institutions often will include values-based specifications (such as vendor type or location) in the solicitation to narrow the vendors submitting bids, and then select the bid based on price alone.

An institution cannot split purchases to bring the contract prices below the micro- or simplified purchase thresholds. [28] However, the institution can split a bid by purchasing the item from two vendors if there are inherent differences in the products sought, such as shelf life, seasonality, or delivery method. [29] Note, too, that an institution can still use formal procurement procedures for purchases that fall below the simplified acquisition or micro-purchase threshold.

Noncompetitive Procurement

Federal law allows for noncompetitive procurement when:

• the transaction amount is below the micro-purchase threshold;
• the need can only be fulfilled by one vendor;
• emergency circumstances do not allow time for a public solicitation; or
• efforts to solicit multiple bids are unsuccessful. [30]

In these instances, an institution can reach out directly to a vendor to make a purchase.

State and Tribal Procurement Laws

States and tribes have their own legal framework for procurement transactions. [37] All state and tribal procurement funded by federal awards must comply with requirements included under any applicable state or tribal law and requirements under federal law, including the Uniform Guidance.

State procurement laws and regulations vary across the country and are subject to change, making it difficult for organizations to maintain up-to-date databases of state procurement laws and their application to food procurement and solicitations. [38] Generally, a state’s department of administrative services will highlight the relevant procurement law and regulations, and these offices sometimes provide a procurement manual or other guidance on state purchasing. [39] State laws may set acquisition thresholds lower than the federal threshold ($250,000), which can affect when formal procurement is required. A 2022 survey based on state-reported procurement thresholds found that the average formal procurement threshold was about $61,000. [40] Generally, the more restrictive procurement law will determine when formal procurement procedures are required.

Exceptions to Formal Procurement Requirements 

Some states have laws that exempt state agencies from formal procurement procedures for certain types of acquisitions. States may condition these exceptions on certain requirements or may exempt only some procurement requirements. An institution should consult with its procurement officials and legal team to ensure compliance with applicable state laws. Some common exceptions include:

• Type of Product Exceptions: Some states may exempt certain types of products (e.g. perishable foodstuffs, dairy, or meat) from formal procurement requirements, regardless of the transaction cost. [41] States may define “perishable” differently, so it is important to review your state’s law closely. Other states exclude farm products, such as fruits, vegetables, eggs, milk, meat, and fish. [42]
• Locality Exceptions: Some states exclude all purchases of products harvested, processed, or manufactured in-state. [43] Other states have a narrower locality exception, applying it only to locally grown or processed food. [44]
• Specific Buyer or Use Exceptions: Sometimes, states exclude certain uses from formal procurement requirements, such as excluding purchases for use in prisons. [45] Other states may exclude certain buyers, such as excluding the entire state-run university system from formal procurement requirements. [46]

Permitted and Required Vendor Preferences

States may have laws that permit or require giving preference to certain types of products or vendors when evaluating bids from multiple qualified vendors. Some examples include:

• In-state preferences: Several states give preference, sometimes a specific percentage, to products grown or produced in the state. [47] Reciprocal preference rules match the advantage an out-of-state bidder would receive in its home state. [48]
• Race- and Gender-Conscious Measures: State and local laws may allow race- and gender-conscious preferences in solicitations and contracting decisions, but these programs are subject to strict constitutional standards and are often challenged in court. [49] Recent court decisions and executive actions have criticized or struck down certain race-conscious policies. [50] However, many states still operate race- and gender-conscious programs with the appropriate judicial foundations, and these programs can support values-based procurement efforts in public institutions’ solicitations and contracting. Additionally, public institutions may utilize race- and gender-neutral measures to expand contracting opportunities that align with values-based procurement. [51]
• Values-Based Food Purchasing: Recently, a few states have begun encouraging public institutions to adopt values-based food purchasing. In 2024, the New York legislature passed the “Good Food NY Bill,” which allows municipal public agencies to award contracts to qualified bidders that fulfill values-based criteria when the bid is not more than 10% higher than the lowest responsible bidder. [52] While the bill was vetoed by the governor in December 2024, it indicates a growing interest in values-based food purchasing. [53]