Comments on Food Delivery Systems: Proposed Rule

______________________________________________________________________________________

 

Comments on Proposed WIC Rulemaking

 

 

USDA – FNS – Special Supplemental Nutrition Program for Women, Infants and Children

 

 

Submitted To:

Ms. Patricia Daniels, Director
Supplemental Food Programs Division
FNS – USDA
3101 Park Center Drive, Room 540
Alexandria, Virginia 22302

 

 

Submitted By:

Burger, Carroll & Associates, Inc.
1421 Luisa Street, Suite A
Santa Fe, NM 87505

 

 

August 24, 1999

 

 

Burger, Carroll & Associates, Inc, is a New Mexico-based management consulting firm whose principals, staff and associates have over 100 years of WIC experience. Collectively we have worked at every level of the Program--local, state and federal. BCA staff include two former state WIC directors, with twenty five years of combined WIC management experience in three states, and a former FNS regional staff member.

For over twenty years, staff of BCA have been involved with the management and evaluation of the WIC Program. We have worked with the national and regional FNS offices on Food Stamp and WIC vendor studies and evaluations, including projects in the 1980’s to assess vendor management nationally. One of the principals of BCA first described and proposed the use of vendor peer groups and specific statistical routines to identify high risk WIC retail behavior, in the 1982 ANALOGS study. It appears that the analysis routines mandated by the proposed regulations are based on these early concepts. Today, we find that those early potential indicators of abuse still continue to be useful for many states.

As a company we have gained a unique perspective on WIC – having consulted with states in every FNS region and in two oceans. We have been privileged to assist states at many different stages of WIC Program development. We continue to support WIC’s mission and salute those who make it happen every day in clinics and grocery stores across the country.

We appreciate this opportunity to share our thoughts on the proposed rulemaking and hope the Agency will find them useful in its deliberations.

We support much of the content in the proposed regulations, especially those provisions intended to provide states with increased authority to act in regard to non-compliant retailers, agencies and participants. We have learned that WIC compliance promotion and management is a dynamic process. Strategies must be frequently re-examined and revised as appropriate to remain effective.

However, we believe in the efficacy of the goal oriented approach of the current regulations, and thus take issue with many of the procedural mandates in the proposed regulations.

We have organized these comments into three sections:

            General Comments

            Major Issue Areas

            Other Issue Areas

We have three general areas of overriding concern, apart from the specific requirements in this regulation.

First, virtually all of the references and resources cited or discussed throughout the proposal are several years old. The most recent citation is the 1993 release of the 1991 WIC Vendor Issues Study results--over six years ago. Although we at BCA are proud to have authored or co-authored many of the WIC vendor management resources referred to in the preamble, we regret that so little new work has been done on the national level in this area for several years.

In particular, we are concerned that the regulations make frequent reference to the 1988 GAO vendor audit. The findings from this study are eleven years old. In citing these findings, FNS appears to assume that WIC retailer management has been completely static during this period. While it may be true that some activity has been delayed for years in anticipation of the re-release of these regulations, many states have made significant changes in retailer management overall during this period. Some states have adopted, and in some instances have later abandoned, the concepts and methods FNS proposed in regulations in 1990.

In the preamble discussion of the history of WIC vendor regulations, FNS states that the 1982 final rule primarily outlined broad outcome goals, rather than prescriptive practices. It goes on to say that in the subsequent sixteen years states have had the opportunity to develop systems to meet these goals, but have largely failed to do so. However, the primary evidence citing that this approach has not worked is the 1988 vendor audit, conducted only six years after the release of those regulations.

Many states already meet the standards FNS wishes to prescribe. The proposed regulations provide little or no recent, credible evidence to support imposing the new requirements on all of the states. Indeed, putting procedural requirements in regulations negates the flexibility of states to change and adapt to new circumstances.

Our second major area of concern regards a number of apparent internal contradictions in the proposed procedural requirements. A primary example is the suggestion in the preamble that states could override their own limitation policy by establishing different pricing rules for small businesses (a position which does not seem supportable under the specific proposed language, in any case). These contradictions will be discussed in detail in the sections related to those requirements.

The third area of concern is that, like the regulations proposed in 1990, these adopt a "one size fits all" approach. While some degree of policy uniformity is desirable, particularly in the area of minimum sanctions, procedural uniformity is not an advantage. For example, a State the size of Delaware manages a competitive limitation policy by dividing the state into fourteen areas. They contract with a relatively small number of retailers, and the process can be accommodated by even the small staff in that state. A State like California with its 3,800 authorized retailers would need to create literally hundreds of competitive areas to insure equitable treatment and access. Managing this process would require an incredible amount of resources. Other examples of this standard approach to problems will be cited.

Through BCA’s long involvement in WIC retail management systems we have developed an underlying philosophy which informs many of our comments on the proposed regulations. In brief, we believe that whenever possible, competitive market forces should be used to control retailer actions, including prices. As will be explained in the section on limitation policies, restricting the number of retailers can stifle, rather than enhance competition, creating its own set of problems. Further, USDA’s own data suggests that a competitive marketplace strategy actually better meets its stated goals than do limitation policies.

In our experience, the WIC program is best served when it minimizes active interference in the marketplace. Most WIC attempts to manipulate the competitive marketplace have had unintended consequences, which have tended to undercut the goals the Program was trying to achieve.

1. Limitation Criteria

246.12g2

BCA supports providing states the authority to limit the number of retailers with which they contract. Although not explicitly stated in the current regulations, states already have an implied authority, which many states have exercised. It may be useful for some states to have language in the Regulations confirming that authority.

We are opposed, however, to a regulatory requirement mandating that states limit the number of retailers, particularly if they require states to develop arbitrary, numerical quotas for the number of authorized retailers. We have three major reasons for this opposition:

        1.  The requirement is unnecessary to achieve FNS's goals,

        2.  There is evidence suggesting that it does not achieve such goals, and,

        3.  If implemented, it may actually harm retail vendor magament efforts nationwide.

While the regulations stop short of prescribing numerical quotas as part of the limitation policy, it is clearly implied in the requirement to "at least consider" participant to retailer ratios in establishing the limitation. (If a limitation requirement is included in the final rule, the rule should clarify whether a participant to retailer ratio is actually required.)

Why is mandated limitation necessary? The preamble says that "States…believe vendor numbers can be effectively controlled through the application of strong selection criteria." This is true. This admission effectively undercuts the Department’s argument for imposing a limitation policy. Strong eligibility criteria tends to both self-limit the number of authorized retailers and ensure that the retailers who are authorized are more "desirable" and compliant with program rules.

Indeed, the Department’s own data reveals that the number of authorized retailers has actually gone down since 1993. During the same period, the caseload has grown measurably, so participant-to-vendor rations have steadily improved. One wonders why FNS feels the need to interfere with this natural trend. If anything, the question is to be asked is whether in some states clients have enough, rather than too much, access to authorized stores.

The Department’s advocacy of numerical limitations has several other problematic features.

Efficacy is Doubtful

First, the primary argument for applying limitations appears to be to reduce the number of stores that states are responsible for, thus allowing a state to use its resources more effectively. If this notion has merit, it would stand to reason that those states who are currently using some type of limitation policy would have a smaller number of stores than comparable size states that do not use limitation. However, a review of the Department’s 1997 VAMP data and 1999 Program Integrity Profile data shows otherwise.

Fully two thirds of the geographic states already say they have a limitation policy. For the thirty two geographic states that have a self-described limitation policy, the participant to retailer ratios range from a low of 59:1 to a high of 266:1, as shown in Table 1 below. For the sixteen states that do not limit retailers, the lowest ratio is 70:1, the highest is 343:1. The non-limitation group has a mean ratio (185:1) that is thirty percent higher than the mean for the limitation states (143:1). (Attachment 1 showing individual states’ ratios is found at the end of these comments.)

Table 1: Participant to Vendor Ratios
POLICY	LOW	HIGH	MEAN
Limitation (n=32)	59:1	266:1	143:1
Non-Limitation (n=16)	70:1	343:1	185:1

Source: USDA VAMP data, 1997

This illustrates the fact that there is no independent, objective basis on which to establish a defensible, equitable numerical ceiling on the number of authorized stores. While the regulations require states to consider participant access issues, any decision regarding the number of stores necessary to insure access will be very subjective. Any policy that is subjectively applied and denies access to legitimate retail businesses is poor public policy.

The regulations assume that having a smaller number of retailers will require less administrative dollars for monitoring and compliance activities. However, limitation implies a competitive procurement process, which can be very expensive, especially for large states. Large states, which would need to divide the process into multiple regions to handle the workload, could find themselves in a continuous, non-stop procurement cycle. In addition, substantial resources will be necessary to develop and update the system of local market areas within which retailers would have to compete.

It is not at all certain that a limitation approach would save administrative resources; it could easily be more expensive. Frankly, in large states with dense urban populations, we seriously question the feasibility of any limitation strategy.

In the preamble to the proposed regulations, the Department advocates ensuring participant access by continuing to contract with small businesses. At the same time that states are required to limit the number of vendors within a defined area, they are supposed to provide small retailers "...equal opportunity to compete..." by comparing their prices to their peers. However, a limitation policy based primarily on price and a peer group approach are inherently contradictory. A limitation policy that prevented some large stores from participating while allowing smaller, higher priced stores to participate would be an invitation to administrative or legal action against the state. (See comments in Major Issue Area #5, below, explaining why the regulation’s attempt to preclude this result by regulatory decree will not work.)

Food Cost Control is a Different Mechanism

The regulation’s other argument for imposing limitation is to ensure states’ prudent use of the food grant. The preamble cites the requirement in Public Law 105-336 to use prices as a key factor in authorizing retailers. However, states can use prices as a major factor in authorization and monitoring, as required in the law, without imposing arbitrary numerical limits on retailers.

States that limit retailers according to a participant to retail ratio typically require self reported shelf prices as part of the application process. Experience has shown that this requirement by itself does not reduce food package costs. This approach is effective only if coupled with a tight system for monitoring redemptions once the retailers are authorized. In fact, it is generally the redemption monitoring system that is responsible for any savings, not the limitation policy per se. Unfortunately, states that select retailers based on those that claim to have the lowest prices at the time of application often do not have effective redemption control systems, perhaps in the mistaken belief that they are not necessary. In most limitation systems, all stores within a market area are held to the same maximum value on a food instrument, regardless of the differences in prices between retailers.

States that use a managed authorization approach, which begins with the application of strict eligibility criteria, assign stores to peer groups in order to monitor and control their redemptions. This approach recognizes the legitimate differences in operating costs between large and small stores and the different prices they must charge to stay in business. Because no eligible retailer is denied authorization, there is no basis on which to allege discriminatory treatment.

A sophisticated, peer group-based redemption monitoring system can effectively control prices without resorting to a limitation policy. The FNS Administrator’s Award given to Massachusetts in 1999 in recognition of their redemption monitoring system is evidence of that. Not coincidentally, Massachusetts discarded limitation policy after a formal evaluation concluded that it was ineffective, expensive, and indefensible in the face of political opposition. The award winning strategy reduced food cost by approximately five percent while permitting some 150 additional retailers to participate in the program.

Understanding WIC Food Cost Dynamics

It is tempting to ascribe differences in food package costs between states to differences in state policies, including imposing limits on the number of retailers. However, such attempts are misleading unless they begin with a recognition of the differences in retail food prices between states. The American Chamber of Commerce Research Association (ACCRA) publishes a quarterly cost of living index for each state. The list of foods used for this index includes a number of WIC food items: milk, frozen orange juice, cereal, eggs, and canned tuna.

We analyzed the differences between states by constructing a composite, partial food package for each state using these items. We then ranked all the states from highest to lowest retail cost.

We also ranked all of the states from high to low cost based on their gross food package cost using FNS-498 information. We used gross food package costs to eliminate the influence of infant formula rebates.

Next we compared the rankings of states on the ACCRA data (retail prices) and the rankings on WIC food package costs. If a state ranks higher on the retail price scale than on the WIC scale, it is an indication that the state is somewhat more effective in reducing food package costs than other states.

One example, shown below in Table 2, provides an illustration of the difficulty in equating policies with food package costs. Ohio is a state that limits the number of retailers. They ranked 29^th of 45 states on the ACCRA scale and 36^th on the WIC scale. Massachusetts, which does not limit stores, ranked 28^th on the ACCRA scale and 37^th on the WIC scale. Delaware also limits stores, but makes them contract for prices as well. They ranked 6^th on the ACCRA scale, and 17^th on the WIC scale. It would appear that they are somewhat more effective in controlling prices. However, it is probably the contracted price approach that makes the difference, not the limitation per se. (Attachments 2 and 3 showing food package costs per all states are found at the end of these comments.)

Table 2: State Rankings by Food Package Costs
DATA	DELAWARE	MASSACHUSETTS	OHIO
ACCRA	6	28	29
WIC (pre-IF rebate)	17	37	36

Sources: ACCRA, Cost of Living Index, Fourth Quarter 1998; FNS-498, FY 1998

Finally, we note that no state (or published study) has demonstrated that limitation criteria prevent or reduce fraud and abuse. Indeed, there is no empirical evidence that limitation would achieve any of the objectives asserted in the preamble.

2. Monitoring Requirements

246.12(j)1 – 3

BCA opposes the requirement as written for several reasons. First, we believe the massive shift in focus and resources that FNS is proposing will have a long term detrimental effect on the program. It essentially eliminates all requirements for routine monitoring, eliminates contact between local agencies and retail grocers, and replaces these with a 10% compliance investigation/audit requirement. While compliance activities are important and necessary for program integrity, routine monitoring of retailers is important as well. The level and types of resources needed to accomplish these two activities are vastly different, not minimally different as FNS suggests. This is especially true as FNS has been discouraging states from the use of local agency staff for compliance activity for ten years.

The resources required for many states to perform compliance investigations on ten percent of their retailers will not only make any other type of monitoring prohibitive, they will significantly impact other areas of program operation.

BCA believes it is important to perform both types of monitoring activities and that one should support the other. The value of performing each activity is not in question. BCA would support, and we believe it is reasonable to expect states to perform, a compliance investigation level of 5% of authorized vendors per year. We would support continued use of routine monitoring at the 10% minimum level specified in current regulations. These suggested standards are just as arbitrary as those proposed in the regulations; however, we believe they reflect a more reasonable and balanced use of state resources.

We have observed, and believe others have also observed, a retail grocery fraud and abuse lifecycle. This cycle occurs in microcosm as fraud and abuse is detected, investigated, and punished within a concentrated area. Accordingly, it is widely recognized in compliance enforcement that any violation detection profile will eventually become less effective as the "cell" of violations it detects is eliminated. FNS seems to recognize this fact in its intent to update its detection criteria as frequently as every two years. However, without the benefit of randomly selected investigations, there is no means to test the effectiveness of the criteria and when replacement is warranted.

Importantly, our knowledge of state WIC vendor management and information systems suggests that states will not be able to implement changes in their high risk detection systems with the frequency FNS expects. States will always be behind and unable to demonstrate that the current criteria are effective. Therefore FNS will always have reason to change or strengthen its requirements. We also note that while some states do not completely understand the nature of high risk criteria, identifying high risk vendors is usually not a state’s biggest problem. Having the political will to address abuse head on is much more difficult than finding abuse.

Finally, FNS defines the scope of each compliance investigation as being at least 3 negative buys prior to closing a case. Only in instances where the vendor is defined as "non high risk" will states have any discretion in where to cut off investigative procedures. Depending on the nature of violations, even small procedural errors could keep a case open forever. We believe such details are better left in policy guidance, not in regulations that are difficult to amend.

3. The Role of Local WIC Staff in Vendor Management

Overall impact of resource shifting

State and local WIC agencies across the country continue to do a great job supporting WIC’s important mission. One key difference in the administration of WIC compared to Food Stamps has always been WIC’s penetration into the local community. WIC vendors aren’t just numbers; they are neighbors. Our experience suggests that where local agency staff are involved in a well managed, statewide effort to monitor and train WIC retailers, they can provide a resource unmatched in public programs. In many states, trained local staff represent an invaluable asset by providing a local resource regarding allowable foods and by working to resolve problems between clients and retailers before they escalate. While this approach may not be practical in some states, it should not be made unavailable for all states.

By reducing the ability of states to do "routine" monitoring, the regulations negate one of the last, best WIC resources. Routine monitoring has historically been performed by local WIC staff in most states. This use of local resources has been a relatively inexpensive way for the State Program to maintain contact with retail grocers at the community level. The only role left for local agency staff is vendor education. But under the proposal local staff will be less competent to perform this function if they are never in the stores in between, checking the WIC inventory, comparing prices or selection among stores in their area, or seeing the environment that their WIC participants see.

4. Resources

246.12(j)

The Department’s proposal seeks to prescribe the use of state resources for very specific vendor management functions, primarily training and compliance investigation. To comply with these requirements, states will need to increase the amount of resources devoted to retailer management far beyond today’s levels. There can be no doubt that other, important needs will be unmet. What is not known is exactly where and to what degree the diversion of limited resources in response to these rules will hurt the critical mission of WIC.

5. Authority

Vendor Appeals 246.18

The regulations attempt to protect states from appeals by retailers of several new requirements. While we appreciate the Department’s desire to provide a base of support to states, the regulations fail to recognize the reality of state administrative law.

The proposed regulations make certain assumptions about what state agencies can and cannot legally do with regard to retailers’ appeal of state actions. The presumption is made that if a provision is in the WIC regulations, states can use it. This view is at the least overly-simplistic

There are three divisions of law: administrative, civil and criminal. If federal regulations appear to violate due process, (e.g., denying retailers’ appeal rights for state decisions) they will be subject to review in at least one of these venues. For example, FNS can give state agencies the authority to conduct hearings in camera, but such authority is of little value if the state administrative procedure act (APA) doesn’t explicitly support this type of testimony. Every state has an APA. These procedures apply when the state takes an action that adversely affects a constituent. The policies and procedures of state administrative review often supercede the simplified WIC rules.

Another example is in the application of limitation criteria. The regulations would require states to use vendor limitation criteria but would prohibit vendors from appealing aspects of the policy, such as the basis for its implementation. The retail community’s only recourse will be in court, where we believe states will find it difficult to defend their actions, regardless of what the federal regulations say.

6. WIC-Only Stores

Preamble

The preamble to the proposed regulation expresses FNS’ concern about the existence of WIC-Only stores in some states. These businesses have been somewhat controversial in some, but not all, of those states where they exist. Some WIC staff believe that they hinder the nutrition education mission of the WIC Program, which they believe should include teaching good consumer shopping habits. Others believe they serve a valuable niche market, for those participants who do not have access to, feel that they are treated disrespectfully, are too confused by the WIC rules, or are too embarrassed to use WIC food instruments in commercial grocery stores. It is possible that both views are correct. WIC-Only stores also tend to locate where there are significant populations of WIC participants. Often, large commercial chain stores avoid the same areas.

Although compliance buys may, in some respects, be more difficult in WIC-Only stores, some types of common problems – minor and major substitution for example – are non-existent. On balance, monitoring is probably no more difficult than in other types of retailers.

We find no compelling reason for states to attempt to prohibit WIC-Only stores outright. However, it is clear that they do not compete in the free market system in the conventional sense. The usual competitive forces that help control prices in other types of grocery stores do not apply to these businesses. If states authorize WIC-Only stores, they need different tools with which to control costs and activities. In addition to expressing concern, FNS could assist states by including language in the regulations citing their unique dependent relationship with the WIC Program and giving states clear authority to regulate these businesses. Consider the following two examples.

In states that use a rolling average of redemptions to calculate a "Not to Exceed" (NTE) amount for food instruments, a state could calculate this average from redemptions of commercial retailers only, and require WIC-Only stores to comply with the results. Since this would be an exception to the standard procedure for calculating NTE’s, the state may need regulatory language supporting their right to impose additional restrictions.

The regulations could also specifically prohibit authorized retailers from providing financial incentives (gifts) for participants if those gifts are available only to WIC participants and/or purchased with WIC food dollars. Since the only revenues in WIC-Only stores are WIC food instruments, this would prohibit them from giving incentives. While many of the incentives are inexpensive trinkets, others, such as packages of infant diapers in California and Puerto Rico, have a significant effect on WIC food costs.

At the very least, merely threatening states with a closer review does little more than increase the anxiety of WIC directors and other stakeholders. In this area, a little leadership might have been more helpful.

7. WIC EBT

Preamble and Pg. 32311

We are happy that the regulations acknowledge the emergence of WIC EBT, but we believe that the Department should avoid including in the regulations specific instructions and state by state, system by system waivers dealing with WIC EBT. We think that some other forum would better serve the purpose of codifying the similarities and differences between paper based and electronic systems.

Now that the regulations acknowledge WIC EBT and the Department is funding new pilots, it will be important to record these similarities and differences. As a matter of policy, states should assume EBT systems will meet or exceed the requirements for paper systems. Since only a few states are involved so far and their systems or proposed systems are being directly approved by FNS, the pilot systems must be subject to the spirit rather than the letter of the law.

The Department could clarify the language on page 32311 which seems to suggest that in WIC EBT merely accepting the UPC code during a purchase causes federal funds to flow directly into the vendor’s bank account. "At the same time, the vendor’s bank account is automatically credited for the amount of the purchase." We daresay if that were true more retailers would be rushing forward to buy the technology.

Also, on page 32311, the description makes it sound as if FNS wants to know everyone’s PIN number so it can provide case by case exceptions to paper system requirements for reconciliation. We suspect it is not FNS’ goal to violate the security mechanisms of these systems, but merely to have reports related to transactions that have been authenticated by one or more processes.

Finally, we urge the Department to move cautiously in mandating standards in this area. With an emerging technology and just one small pilot to base things on, we encourage FNS to allow a few more pilots to mature before imposing its "one-size fits" mandates on WIC EBT.

8. In Store Training

246.12(i)(1)

Training of new retailers prior to authorization is a reasonable requirement. However, mandating that this training take place on the retailer’s premises is misguided. Many stores, especially smaller ones, do not have a suitable place to conduct the training, and managers are frequently interrupted during the training. Many states have found it more efficient to conduct off-site training classes for small groups of retailers and should be allowed to continue providing it in this manner. As with other aspects of the proposed rules, the high cost and questionable feasibility in large states applies here as well.

 

Proposal Reference	BCA Position	BCA Comments
246.2 Proxy	Oppose because confusing	Labeling parents and guardians as proxies is confusing and does not support the common understanding of the term proxy in the WIC community. In most states, a proxy is someone other than a parent or guardian. There are different rules that apply to their behavior, for example, limits on how often they can be used to pick-up food instruments for a WIC participant. It is understood that a parent redeeming a food instrument for a child is equivalent to a woman redeeming one for herself.
246.2 Vendor	Oppose, substitute wording	We believe this would be a good time to start calling WIC approved vendors what they actually are: retail grocers. We propose the definition be changed to read: WIC Retailer – means a sole proprietorship, a partnership, a cooperative association, or a corporation operating a retail establishment whose primary business is grocery sales. Each individual retail grocery outlet under one business entity constitutes a WIC retailer. Each retail grocer shall operate out of a fixed location. Mobile stores are prohibited unless the state agency can demonstrate a compelling need for such businesses and FNS approves the authorization of each mobile retailer on a case by case participant hardship basis.
246.2 Vendor limiting criteria And Vendor selection criteria	Clarify	The proposal defines vendor limiting criteria and vendor selection criteria. What it labels "selection criteria" should be called "eligibility criteria", and the combination of eligibility and limiting criteria should be labeled the "selection process." The state first defines the limitation policy. Then within the selection process, the state would typically judge applications by the eligibility criteria first. Those retailers that passed would be further subject to the limitation criteria.
246.3(e)(5) Staffing	Oppose	We recognize the need for adequate state level staffing to support retailer management functions. We believe, however, that most states already meet or exceed this requirement. For other states, it would be a simple matter to modify the position description for one or more staff positions to meet this requirement without any meaningful change in responsibility. In short, the requirement does little to insure sufficient attention to retailer management. If the Department retains the limitation requirement, we recommend that a provision be added to prevent state agencies from limiting the number of authorized vendors to less than 50 in order to circumvent this staffing requirement. If USDA seriously believes there is merit in such staffing requirements, then it should work with the states to undertake a study of the issue, based on an examination of effectively managed states.
246.7 (l)(1)(I) Cross-border dual participation	Support	We support the requirement for cross-border dual participation detection where it is a problem and suggest that objective criteria such as population density and access potential be added to ensure that the criteria is implemented.
246.12(c) "Free of Charge"	Oppose	FNS is proposing a major change to this general requirement for food delivery systems. This change is not in keeping with the historic meaning and intent of the WIC Program. The current requirement states: Participants shall receive the Program’s supplemental foods free of charge. This statement has been a fundamental underpinning of WIC retail food delivery systems since the beginning of the Program. Participants do not have to pay cash in addition to their WIC food instruments to obtain the foods prescribed for them. They do not have to pay to be certified at the WIC clinic and they do not have to pay additional cash at the grocery store. The proposed revision would eliminate the retail meaning. This change would expose participants to paying additional cash to obtain WIC foods prescribed on WIC vouchers, checks or EBT transactions.
246.12g2 Vendor limitation	Oppose	Please see discussion of vendor limitation proposal earlier in this report. Limitation should not be required but may continue to be an option for some states. We recommend substituting the following in place of 246.12g2: "States have the right and the authority to establish criteria limiting the number of retail grocery stores with whom they contract if they determine that it is in the best interests of the program to do so."
246.12g3 Selection criteria	Generally Support	1. We support competitive price as a selection criteria when it is expressed very generally. By not defining the term, competitive price, FNS allows states to continue to refine various experimental processes designed to contain costs within an open, competitive marketplace. Unfortunately, under the conflicting requirements for vendor limitation criteria, it will not be possible for small businesses to compete with large businesses based upon price. States will not be able to contract with small businesses if competitive price takes precedence over participant access to foods. 2. We support minimum inventory requirements for WIC and a requirement, similar to that in Food Stamps, that a majority of a retailer’s business be in grocery sales, as part of the goal of authorizing only retail grocery stores for WIC. Such a requirement would not affect WIC-Only stores, but would prevent other types of non-food businesses, such as video rental stores, from applying. This would be a more prudent and effective control on the number of authorized stores than a limitation policy. 3. We suggest the Department require that to be authorized for WIC, the retailer must be approved to participate in the Food Stamp Program. This requirement is designed to ensure coordination between the two programs on retail issues, not to increase or decrease the number of vendors authorized by either Program. This should ensure that WIC participants have an opportunity to shop locally using both types of USDA benefits. The requirement will also encourage coordination and communication between the states and FNS on the related issues of training, monitoring, and compliance enforcement.
246.12g6 Lengthy closed application periods (up to 3 years)	Opposed	BCA supports a strict, but fair retail grocery application process. It should be administered openly in an organized and timely manner. We oppose closing down the vendor application process purely for administrative convenience. In three years, the retail population in an area might change drastically. If a state’s vendor management process is so self-burdensome that it cannot be routinely and fairly administered, an underlying management problem needs to be addressed. In the first years of implementing limitation criteria, some states thought they could stop accepting new applications until the next agreement period. This was touted as a bonus of the limitation philosophy. However, the reality is that states allow numerous exceptions to the closed status; for example, adding new outlets of national chain stores. Chains typically want all of their outlets to provide the same services, including accepting WIC checks. A state that routinely adds them violates the integrity of the limitation process.
246.12h1 Vendor Agreement lengths	Support	BCA supports both the use of multi-year vendor agreements as a practical measure, and the need to establish a maximum allowable length. Three years seems to be a reasonable limitation.
246.12h3viii Vendor agreement payment limits	Clarify	This section deals with requirements of the vendor agreement. However, it appears perhaps unintentionally to require the implementation of vendor peer groups based upon "area." …"In no case may the vendor charge the state agency more than the competitive price limitation applicable to the area in which the vendor is located. " A state may have competitive price criteria with or without the overlay of area being part of the peer group methodology. (Area may or may not be statistically significant.) If it is the Department’s intention to mandate the use of particular kinds of vendor peer groups, we do not believe this is the appropriate way to introduce the concept or the requirement.
246.12h3ix Overcharge vs error—state right to collect full redeemed value of food instrument containing an overcharge, not just the overcharge amount.	Clarify	The Department cites the reason for the proposed change as: "Improves program integrity. Current regulations do not explicitly require, and some state agencies do not take, effective follow up action on suspected and documented overcharges." On its surface, it appears that with this change the Department is "allowing" states to collect the full value of each vendor overcharge or other error. A more salient issue is how to make payment adjustments through the commercial banking system on an FI basis, taking objectively defined competitive price maximums into consideration. States should distinguish between error and abuse. Not to do so is arbitrary and inequitable.
246.12h4 Vendor sanction schedule	Support	BCA supports the requirement that states make public its penalties for abuse.
246.12 i Face to face in-store initial training	Oppose	While we support a requirement for an on-site visit prior to authorization, BCA believes that in-store training is frequently not practical. In- store training could disrupt business in a small establishment and prove quite chaotic in a major chain store. Although some training is almost always provided during pre-authorization visits, it is not usually the full WIC training program and it is usually provided in the course of evaluating the retail premises. We believe the method to be used to provide initial and subsequent vendor training should be left up to the states.
246.12i2 Annual training content	Support	We believe that states should and most states do already meet this requirement.
246.12j1-3 Monitoring vendors and identifying high risk vendors	Oppose the mandated types and levels	Please see the major issue areas discussion of monitoring in the first section of this document.
246.12p Food Instrument Security	Support	We support these measures to increase accountability and prevent theft and other abuse.
246.12r Issuance	Support	We support these consolidations except for the use of the word proxy, which is confusing.
246.12t Conflict of Interest	Support	We support the expansion of the definition from local agency to include state agency and vendors.
246.12u Participant Violations and Sanctions	Support except…	Use of term proxy is confusing. A proxy is generally an adult acting on behalf of another adult participant, for example the spouse or friend of a woman participant. Authorized representatives are parents or guardians with legal responsibility to act on their child participant’s behalf. The regulations must make a distinction between the two.
246.13(l)(I)(B)	Clarify	Regarding permanent disqualification for trafficking: by definition, if "the vendor had at the time of the violations an effective policy and program in effect to prevent trafficking, " then it [trafficking] would not have happened.

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