Public Institutions: Enter Purchasing Commitments

If a vendor and an institution want to establish a more regular purchasing cadence, they might consider establishing a standing purchase order. This is a recurring purchase made at a specified time interval.[11] The purchasing amount can be for a monetary amount (e.g., $500), an exact numerical quantity (e.g., 3 cases of potatoes), or for a quantity by weight (e.g., 10 pounds). The specified interval can be any length of time (weekly, semesterly, quarterly, or seasonally). Generally, the vendor will charge the institution as orders are fulfilled;[12] however, some vendors may be interested in other payment arrangements. In particular, new or beginning vendors may benefit from advance payment as part of the commitment’s payment arrangement. Standing orders are often a good way for institutions and vendors to demonstrate accountability.

Like single purchase orders, standing orders should include clear terms, be tailored to the vendor’s needs, and promote accountability. Regular communication and a collaborative relationship are essential to ensure both parties are benefiting.

Public institutions will need to be aware that standing purchase orders may require formal solicitations, depending on the value and frequency of the transactions. This Toolkit includes model recommendations and language for solicitations tailored to values-based vendors.

In deciding to establish a standing purchase order, an institution should consider the following:

• What values-based vendor can meet the institution’s values-based food purchasing guidelines?
• What product is available from the vendor?
• What product is sought by the institution?
• What quantity and price are appropriate and feasible?
• What installment frequency works for both the institution and vendor?

The following recommendations provide model language and alternatives for effective standing purchase orders.

Note:

Standing purchase orders are easiest to set up through informal procurement. Accordingly, the recommendations here assume that no formal solicitation is issued to find a vendor. If a formal solicitation is required, it can still be tailored to ensure bidders align with the institution’s values (see Values-Based Purchasing When a Formal Solicitation is Required).

Identify Well-Positioned Vendors for a Standing Purchase Order

Before establishing a standing purchase order, an institution must first identify a vendor with whom it has a solid working relationship. Standing purchase orders require coordination and flexibility to meet both parties’ needs. As such, an existing relationship is incredibly useful for a standing purchase order.

Individual purchase orders provide opportunities for parties to develop a relationship and demonstrate accountability before entering into a standing purchase order. Therefore, an institution should consider first the vendors with which it already has a purchasing relationship.

Model Recommendation

Determine Which Products are Viable for a Standing Purchase Order

This step prompts an institution and vendor to identify what product and amount are suitable for a standing purchase order based on need, production capacity, and pricing. This requires assessing: 

• What products will be available from the vendor and when?
• What products does the institution need regularly? What is the quality of product the institution requires?
• What amount and price are appropriate and feasible?
• What installment frequency fits these needs?

Each of these components will guide conversations between the institution and vendor.

Standing purchase orders can be based on one product or on an aggregate of products. When purchasing from a food hub or other aggregator, the standing order may apply generally to all of the hub’s producers or specify particular producers.

Model Recommendation

Establish Standing Purchase Order with the Vendor

This step prompts the parties to finalize the standing purchase order in writing. [13] To ensure an effective standing order, institutions and their values-based vendors need to include specific components and details.

This template is just one example for establishing a standing purchase order. It provides a reference and starting point for parties that can be used to inform and guide their specific process.

Standing purchase orders should incorporate the following:

• Administrative Components
  • Tracking Number
  • Date
  • Buyer’s Contact Information (the Institution)
  • Vendor’s Contact Information (the producer or food hub)
  • Authorized Signatures
• Order Components
  • Product(s), Quality & Pricing
  • Frequency & Duration
  • Payment Terms
  • Delivery Terms
  • Cancelation Policy
  • Other Terms & Conditions

More details about each order component are included below. A full template with all sample language is also available. 

Product, Quality, and Pricing

A standing purchase order should contain the committed amount, a detailed list of items and required quality, and unit price parameters.[14] This section is critical, as it defines what will be purchased in each installment.

Model Recommendation

Example:

ABC Corporation will purchase 400 dollars per installment of the standing purchase order with XYZ Food Hub. Installments will be comprised of U.S. No. 1 or No. 2 vine-ripe tomatoes. Pricing per unit of product will adhere to the following:

• Example Pricing Options:
  • Tomatoes (vine ripe) between $16.00-$20.00 per 10-pound flat.
  • Tomatoes (vine ripe) 10-pound flat at market price set by USDA Market News on the day of delivery.
  • Tomatoes (vine ripe) 10-pound flat within a 2% deviation from the market price set by USDA Market News on the day of delivery. Pricing per unit will not exceed $22.00.

The product, quality, and pricing breakdown can also be conveyed in a chart: 

Alternative: Dollar Amount Without Product Specifications

An institution and vendor may prefer a standing purchase order that states the total dollar amount committed for each installment but does not specify a product. This is best suited for institutions and vendors that want to preserve flexibility. However, this alternative requires regular communication about institutional needs, vendor product availability, and pricing for each installment.

Alternative: Amount by Quantity

The model recommendation provides a set dollar amount. However, an institution may instead specify a numerical product quantity. This quantity is typically measured via weight or package method (e.g., case, bushel, box, flat).

Example:

ABC University will purchase two (2) ten-pound flats of U.S. No. 1 or U.S. No. 2 vine-ripe tomatoes from XYZ Farm. Pricing per unit of product will adhere to the following:

• Price of a ten-pound flat will be the market price for similar products, as set by USDA Market News on the day of delivery, but will not exceed $22.00.

This information can also be conveyed in a chart:  

Frequency & Duration

A standing purchase order should identify both: (1) the recurring interval in which purchases are made, and (2) the total duration of the standing purchase order. Committing to a specific duration is not necessarily required, and the parties can agree to an indefinite timeframe if they wish.

Model Recommendation

Alternative: Exclusion/Reduction for Specified Installments

A public institution may sometimes need to exclude or reduce certain installments in a standing purchase order. Often, this arises during short-term periods where the institution knows there is a decreased need, such as during school breaks or holiday weeks.

Any exclusions or reductions should be clearly stated upfront in the standing purchase order and communicated to the vendor. They should not be added routinely during the agreement period, as vendors rely on consistency to plan production and assess feasibility.

If frequent exclusions or reductions are anticipated, the parties may be better served by scaling down the standing order or using individual purchase orders until greater consistency is possible.

Payment Terms

A standing purchase order must specify payment terms, including when payment is due and in what form.

Model Recommendation

Delivery Terms

A standing purchase order must contain information about the delivery method, delivery address, expected delivery dates, and any special instructions for delivery.

Model Recommendation

Cancellation Policy

A standing purchase order for values-based procurement should include a cancellation provision allowing either party to withdraw without cost or obligation. This flexibility differentiates this type of purchasing from a formal contract.

Management companies often require a cancellation provision, and self-operated institutions typically prefer them to maintain flexibility and ensure their dining needs are met. Vendors, especially beginning farmers and new food hubs, may also want the option to cancel if they cannot fulfill an order.

The tradeoff, however, is less certainty. To mitigate this risk, institutions and vendors should follow a deliberate process of assessing, developing, and scaling their relationship, so they can enter the standing order with the mutual trust necessary to feel confident in the arrangement.

Model Recommendation

Other Terms and Conditions

A standing purchase order may contain additional terms and conditions. These include any specific terms or conditions related to the purchase, such as return policies, warranties, or other stipulations.[16]

Model Recommendation