The attached memorandum is Food Distribution Policy Memo FD-110, which clarifies requirements in crediting for, and use of, USDA donated foods in contracts with food service management companies, and provides guidance to ensure compliance with such requirements in the first and final years of such contracts.

The purpose of this proposed rule is to incorporate this procurement option in the programs' regulations and to define the term "unprocessed locally grown or locally raised agricultural products'' to ensure that both the intent of Congress in providing for such a procurement option is met and that any such definition will facilitate ease of implementation for institutions participating in the child nutrition programs.

We are continuing to receive questions regarding procurements in the child nutrition programs, particularly in the National School Lunch and School Breakfast Programs. Attached are the most recently received questions and answers.

We have recently received a series of questions regarding the procurement of automated meal accountability systems in conjunction with the procurement of a food service management company.

Periodically, we receive questions concerning the procurement requirements of 7 CFR Parts 3016 and 3019 and certain procurement procedures used by public and nonprofit school food authorities. Attached are a number of these recent questions and their corresponding answers.

Regarding awarding contracts, state agencies are advised to carefully review school district to ensure they are in compliance with federal regulations and take appropriate actions.

Recently, we have been asked 1) whether an equipment manufacturer would violate Department regulation 7 CFR Part 3016.60(b) if the equipment manufacturer writes the bid specifications for a school food authority (SFA) when that manufacturer does not directly sell its products to the SFA, but uses dealers or distributors instead and 2), would a food service management company (FSMC) violate §3016.60(b), if the FSMC drafted a provision to amend an existing SFA-FSMC contract

As you know, in August 2000, the procurement requirements for the child nutrition programs were moved from Department regulation 7 CFR Part 3015 to 7 CFR Parts 3016 and 3019. Attached are a number of questions and answers we have received concerning how these requirements changed the procedures for procurements paid with State Administrative Expense Funds.