Title: DIRECT DIVERSION PROCESSING Basic Training Session
1DIRECT DIVERSION PROCESSINGBasic Training Session
- Wednesday
- September 24, 2008
- 1230 to 200 pm
2What is Direct Diversion?
- Processing Option for WI schools
- Bulk commodities committed by schools on annual
order to chosen processors - For example
- Raw bulk chicken into chicken nuggets
- Raw coarse ground beef in cooked beef patties
- Bulk orange juice into 4-oz orange juice cups
- Bulk commodities are ordered by DPI to be shipped
directly from USDA to the processors
3The Benefits
- Increase participation
- More variety
- School-specific products
- Consistent product
- (commodity commercial)
- Can Save you Money
- Easy/fast preparation
4How Do Schools Commit Bulk Pounds?
- During the Annual Order Period (January 15 to
February 15) schools select the processing option
of their choice. - The direct diversion processing survey lists all
bulk commodities and participating processors.
5Direct Diversion Processing Survey
6Bulk Raw Products List
7Processors Available for Bulk Coarse Beef
8What Do I Have To Do?Where and How Do I Start?
9THE STEPS
- Processors
- Products
- Procurement
- Agreements
- Annual Order
- Order End Products
- Monitoring
10PROCESSORS
- Who are the eligible processors for Wisconsin?
- Annually, all interested processors must
complete an Intent to Participate form and
return to DPI. - A List of eligible processors is listed on the
DPI website at the end of September of each year.
11Products
- What products are available for your program?
- 1) Processors Summary End Product Data
Schedules - 2) Food Show
12Summary End Product Data Schedule (SEPDS)
13SEPDS
- Please Note The commodity values are updated
annually by USDA. The new commodity values are
released on November 15 for the following school
year. Each processor must re-submit their SEPDS
to USDA for approval after the release on
November 15th. It takes some time for USDA to
approve the SEPDS with the new prices.
Therefore, the SEPDS may not be available for a
few months after the release of the new prices. -
- The commodity value for the bulk commodity may
increase or decrease. - Therefore, the amounts in Column H and Column I
may be slightly different for the upcoming year.
14Products
- How many servings per product do you need?
- Determine approximate usage by
- Servings per day x number of days on menu
- (100 students x 45 days 4,500 total servings
needed)
15PROCUREMENT
- Informal and formal procurement methods are
established practices, appropriate for the
acquisition, that are followed consistently. - Determine which method you must use.
16Informal Procurement
- Relatively simple and informal practices to
acquire goods and services that cost less than
the small purchase threshold (100,000) - Small purchases are conducted using specific
procedures that are not as rigorous as formal
procedures, but STILL PROVIDE COMPETITION.
17Informal Procurement Method
- Price quotations are obtained from an adequate
number of qualified sources. - Although informal, school should provide an
adequate purchase description for the desired
product(s).
18Formal Procurement
- Formal procurement methods are established
procedures that must be followed when purchase is
expected to equal or exceed the small purchase
threshold (100,000)
19Formal Procurement Methods
- Competitive Sealed Bidding
- Competitive Proposals
20Competitive Sealed Bidding
- Invitation for Bid (IFB)
- Most appropriate for processing
- Must have a complete, adequate and realistic
specification or purchase description - Firm fixed price contract and is awarded to the
lowest priced responsible, responsive bidder - Formal advertising is required
- All bids opened publicly on specified date
21Competitive Proposals
- Uses a Request for Proposal (RFP)
- Firm fixed price or cost reimbursable contract
is awarded to the responsible offeror, price and
other terms - The response to a RFP consists of two distinct
elementstechnical proposal and cost proposal - Offerors to a RFP must be ranked using identified
criteria
22What additional direct diversion-specific
information do I need to include in my
informal/formal procurement process?
- End Products
- 1) What end products to purchase
- 2) Approximate usage of products (how much do
you need to order?) - 3) Delivery schedule of end products
- 4) Specify delivery location of finished end
products (i.e., to your district or to your
distributor) -
- Value Pass Through Methods
- Yield Options
23What Information Do I Require the Vendor to
Include in Their Submission?
- Manufacturers product code number of product(s)
submitting for bid - USDA bulk commodity code number for the commodity
used in the end product(s) - The meal pattern contribution per serving
- Summary End Product Data Schedule (SEPDS)
24Delivery of End Products
- All direct diversion processed products cannot
come through the state-contracted warehouses. - School must ensure that theyve addressed
delivery needs as a part of the procurement
process. - It may be necessary to coordinate commercial bid
for delivery of commodities with direct diversion
procurement process.
25What is Value Pass-Through?
- Value pass through is the way in which SFAs
receive the full value of donated food contained
in a further processed product. - (Or, the entitlement value of the bulk product
contained in the end product.)
26Value Pass-Through Options
- Sales Refund to Recipient Agency
- Fee for ServiceProcessor
- Fee for ServiceDistributor
- Net Off Invoice (NOI)
27Sales Refund
- DirectProcessor sells end product directly to RA
and invoices RA at gross price. RA applies for
refund/rebate for value of commodities contained
in end product. - IndirectProcessor sells end product to a
commercial distributor at gross price.
Distributor invoices RA for gross price. RA
applies for refund/rebate from processor. - commercial price Your price
- (school applies for a refund monthly)
- Example of this value pass through method is the
cheese processing program.
28Fee for ServiceProcessor
- Processing fee charged by processor.
- Processor invoices RA for the cost of the
non-commodity ingredients and the processing fee. - Value of the commodity has already been taken out
of the price. - Other ingredients labor packaging overhead
other costs Your Price
29Fee for ServiceDistributor
- Distributor invoices RA for the cost of the
processed product and distributor
handling/storage fees. - Price represents a processors cost of
ingredients, labor, packaging, overhead and other
costs incurred in the conversion of commodity
into an end product. - Value of commodity has already been taken out of
the price. - other ingredients labor packaging overhead
other costs Your Price
30Net Off Invoice (NOI)
- Processor sells to a commercial distributor at
gross price of end product. - Distributor invoices RA at net case price.
Invoice lists gross price, minus value of
commodity in case and then net case price. - Distributor claims a credit from processor for
the value of commodity food contained in the end
product. - gross price - commodity value net case
price
31Why Do I Need to Know Value Pass Through Methods?
- Not all processors do all methods.
- During the procurement process, SFAs need to
indicate which VPT method(s) they are requesting
pricing for. - For monitoring purposes, SFAs need to ensure
they are receiving the full value of donated food
back.
32What is A Substitutable Donated Food?
- In commodity processing, all donated foods
offered by USDA to distributing agencies fall
into one of the following categories - 1) substitutable
- 2) non-substitutable
33Substitutable Donated Foods
- Full Substitution
- Limited Substitution
34Full Substitution
- A processor can substitute commercial food for
commodity foods (except beef, pork, and poultry
on a limited approval basis) without restriction,
so long as the substitute food is of the same
generic identity, equal or better quality, and of
domestic origin. - Fully substitutable foods are subject to the 100
yield requirements.
35Limited Substitution
- The substitution of commercial product for
donated foods with some restrictions. This is
applicable to poultry products. Processors must
have a substitution plan approved by both FNS and
AMS. Only bulk pack chicken, chicken parts, and
bulk pack turkey delivered by USDA vendors to
processors are eligible for substitution. - No backhauled poultry may be substituted.
36Non-Substitutable Food
- A USDA donated food that cannot be substituted
with a commercially purchased product under the
terms of a processing agreement.
37Why Do I Need to Know About Substitution Methods?
- The type of substitution method utilized by your
processor(s) will determine when you receive
finished end products.
38What is Yield?
- For a defined amount of bulk raw commodity used
to process a finished end product, yield is the
amount (or percent) of commodity that ends up in
finished end product.
39Yield Methods
- 100 Yield
- Guaranteed Minimum Return (GMR/GMY)
- Guaranteed Return (GR)
- Standard Yield (SY)
40100 Yield
- Processor must return 100 of the donated food
received back to RA in the form of finished end
products. - Processor must add equivalent commercially
purchased food to make up for manufacturing loss. - Example is cheese processing
41Guaranteed Minimum Return
- The minimum weight or number of units of
processed product that will be produced and
returned for a set amount of donated food
provided. - This information is obtained from the processors
summary end product data schedules. - Example is turkey mini corn dogs.
42Guaranteed Return
- A red meat processing option
- Specifies an exact number of finished cases that
will be returned to the RA from the processor. - Example is beef patties.
43Standard Yield
- A concept that fixes the number of finished cases
that a RA will receive from a fixed truckload of
raw commodity. - Standard yield will be higher than a processor
could normally achieve in regular processing. - Standard yield requires the processor to add some
commercial product to the commodity product. - Example is chicken nuggets.
44Why Do I Need to Know Yield Methods?
- Schools need this information for procurement
evaluation. - Schools need to know the various methods for
monitoring, to ensure receipt of full commodity
value.
45Conducting the Procurement Process
- Federal, State and local regulations must be
followed. - The most restrictive regulation(s) prevails.
- The procurement goal is to obtain the best
product at the lowest price through a competitive
process.
46Award Selection
- The final step of the procurement process
- Awarding to winning vendor(s)
- Entering into a contract/agreement with
vendor(s).
47AGREEMENTS
- DPI/SFA Agreement
- Fees for Service Recipient Agency and Distributor
Sample Agreement - Value Pass Through (NOI) Recipient Agency and
Distributor Sample Agreement
48DPI/SFA Agreement
- Due back to DPI by February 1
- Annual agreement
- Prep/joint language
- FSMC/Vendor language
- Agreement available on DPI/Commodity webpage
49Fee for Service Recipient Agency and Distributor
Sample Agreement
- Outlines responsibilities of each party
- Annual agreement
- Invoicing details
50Value Pass Through (NOI) Recipient Agency and
Distributor Sample Agreement
- Annual agreement
- Outlines distributors responsibilities
51DIRECT DIVERSION ANNUAL ORDER PROCESS
- Determine raw pounds to commit.
- Make commitments on annual order.
- View final commitments for upcoming school year.
52Determining Raw Pounds
- Peanut Butter (DF) and Jelly Sandwich
- DF Inventory Draw
- Down per case Approximate Usage Raw pounds to
commit - 5.08 lbs. X 63 cases/year
321 pounds - Chicken (DF) Nuggets
- DF Inventory Draw
- Down per case Approximate Usage Raw pounds to
commit - 20 lbs. X 55
cases/year 1100 pounds
53Annual Order Period
- January 15 to February 15, place annual commodity
order. - Per commodity product, enter total commitments by
processor.
54Inventory
- Bulk commodities have various ship periods
available, which may affect when schools may
start receiving finished end products. - Some processors will allow schools to receive
finished end product(s) prior to processor
receiving USDA bulk commodity(s). - Verify with your processor(s) when you can start
receiving finished end products. If and how much
varies by processor.
55Inventory
- USDA Policy FD-040 explains inventory draw down
for each value pass through method. - DPI Inventory Carryover Policy.
56Shortages/delays/cancellations
- Do USDA commodity delays, shortages, and
cancellations affect direct diversion? - Yes, but how and to what extent depends on the
processor and the VPT.
57Final Commitment
- In May, schools can view final commitments
ordered for each processor. - Adjustments may have been made by DPI to schools
initial commitments.
58ORDER END PRODUCTS
- May through July schools will work with
processors and food brokers to place orders and
identify delivery schedules and locations for the
upcoming school year. - Please note that all processors have different
lead time requirements for placing orders.
Therefore, placing your orders early is important
to ensure that processors can meet your delivery
schedule.
59ORDER END PRODUCTS
- Minimum production run requirements apply at the
processor level. In addition, processor may have
minimum ship requirements. - Minimum drop requirements apply at the
distribution level. - Remember, all direct diversion processed products
do not come through the state-contracted
warehouse.
60MONITORING
- August to May All schools must track orders to
- 1) ensure orders are accurate and complete
- 2) monitor inventory balances at processors
- 3) monitor value pass through methods to
ensure receipt of entitlement value - School agrees to participate in all processors
sales verification programs.
61MONITORING (Contd.)
- Many of the processors have electronic systems
for monitoring inventory balances. - Schools are responsible for understanding and
accessing all applicable systems, as used by
their selected processors - Two common systems used
- K12-Food Service http//www.k12foodservice.com
- ProcessorLink https//www.processorlink.com
62Invoicing
- Administrative fee charged on all bulk pounds
committed to processors. - Bulk pounds committed for both direct diversion
and cheese processing program will have an
administrative fee. - Fee is charged on the adjusted amount, after DPI
has balanced truck loads. - Fee is billed in August of each school year and
collected through the offset method.
63Direct Diversion Timelines
- Mid-Aug Direct Diversion information Packet
mailed to all SFAs - 1st wk Sept Processors return Intent to
Participate agreement to DPI - Mid-Sept List of interested processors posted on
website - Sept 24 Food show with all interested direct
diversion processors for all potential direct
diversion schools - 1st part Oct Direct Diversion training session
- 3rd wk Oct Detailed direct diversion process
packet available online - End-Oct SFAs begin procurement process for
direct diversion vendors - Mid-Jan SFAs select direct diversion vendors,
using appropriate procurement process. SFAs
verify commercial distribution of selected
processed products with their distributor(s) - Jan 15 to
- Feb 15 SFAs commit pounds of bulk products
to vendors (on annual survey) chosen through
the procurement process - Feb 1 Direct Diversion Agreement between SFA and
DPI due to DPI
64Resources and Contacts
- DPI Website http//dpi.wi.gov/fns/index.html
- USDA Website http//www.fns.usda.gov/fdd
- ACDA Recipient Agency Commodity Processing
Handbook available on the DPI Commodity webpage. - DPI Contacts
- Laura Sime, 608/267-9119, laura.sime_at_dpi.wi.gov
- Lynne Slack, 608/266-2596, lynne.slack_at_dpi.wi.gov
- Dino Ante, 608/266-3615, antonio.ante_at_dpi.wi.gov