Fighting talk

In April 1996, the Strathclyde region will be split into 12 unitary authorities, replacing both the umbrella regional council and the 19 district councils. For direct service organisation Catering Direct, this means it too faces a break-up along new authority lines.

Its last hope of staying together in its existing form is the "period of persuasion" it has been granted to put its case to the new unitary authorities. The battle is on to win over district and regional councillors (as well as their opponents standing in the 1995 local elections), district chief executives, politicians, trade unions, school boards, head teachers and the media.

Catering Direct is pinning its survival on becoming a "joint board" servicing the whole region. The police, fire and transport functions have been allocated joint board status and are centrally administered. Provided the new authorities are in agreement, Catering Direct can also elect for central status.

Other options have been considered, such as a management buyout (MBO) or a link-up with a commercial contract caterer, but Strathclyde region is staunchly anti-privatisation and rejected these proposals outright.

But if Catering Direct were to split, it would become easy prey to commercial contractors in the next round of compulsory competitive tendering (CCT).

As a series of smaller organisations, Catering Direct would lose its buying power and economies of scale. Not only would this make it less able to compete with commercial contractors, but it would affect its ability to make the statutory 6% return on investment required for it to keep the contract.

"The new authorities would take over the existing contract terms, which we originally set on the basis of central buying power," explains Catering Direct director Avril Robertson. "We have also charged each district a standard price so that, for example, Glasgow subsidises Argyll & Bute as it incurs enormous costs in island transport and in some cases serves schools with just a handful of children."

The organisation claims the split could add 15% to its central purchasing power of £23m. It is also likely to lose central functions such as dietetics, nutrition and marketing - or else they will have to be duplicated 12 times over, adding costs for which the Government has said there will be no extra money.

"We have 120 staff in head office to cover all the central functions - split that by 12 and you have nowhere near enough people," points out Robertson.

While it is an anxious time for all Catering Direct's 8,200 staff, those most worried for their futures must be the executive management team of seven, which Robertson heads. If the organisation were to split, there would be no need for the current full management structure.

Recent high-profile marketing campaigns such as the £250,000 branding exercise introduced last year would inevitably disappear, as would a recently-launched healthy eating programme.

What would happen to Catering Direct's less publicised functions such as its emergency feeding division is less clear. This is a facility that can step into action 24-hours a day if needed, catering for unexpected events such as the recent flooding or police murder hunts.

Besides the weakened position of smaller organisations, there is also the difficulty of having to prepare for retendering almost immediately. "The new divisions would barely be set up in 1996 when they would need to start putting together tender specifications for 1997," says Catering Direct depute director Fergus Chambers. "It's been shown that flawed specifications are one of the main reasons for contracts being lost, and whereas at present we have a client department to put contracts together, the new authorities wouldn't have that expertise."

There are plenty of predators for whom Catering Direct's break up would present a welcome opportunity. Scottish school meals contractor CCG does not hide the fact that it would be interested in certain parts of the business. "Certainly some areas are very attractive indeed, but nobody yet knows what would be included in the new contracts," says marketing director Barbara Copland.

But putting commercial interest aside, Copland recognises the achievements of the Scottish DSO. "As professionals, most of my colleagues admire what has been done at Catering Direct - they deserve a lot of credit for a job well done," she adds.

Quadrant, which is looking at a move into school meals contracts over the next three years, is eyeing the pickings in the Strathclyde region eagerly.

"The problem with Catering Direct's contract is that it is very thinly spread geographically," says Quadrant commercial director Carol Rodgers. "But it would fit well with our portfolio as we already operate a basket of sites, ranging in size from large 24-hour sorting offices to much smaller outlets."

Inevitably, the more densely populated urban areas will be those that attract contractors - and the very same authorities that are most likely to want to go it alone on catering.

But Catering Direct is not giving up easily. Its slick marketing operation has swung into action, spreading its message to anyone who might be able to influence its future.

As soon as it was granted its period of persuasion just before Christmas, wheels started turning. A three-week radio campaign was run on three local radio stations, ostensibly promoting healthy eating and the Catering Direct name. But the real message was in the words of the background music - "Never give up on a good thing" by George Benson.

A video explaining the Catering Direct case was sent to the homes of all regional councillors on 27 December. On it were endorsements from suppliers, employees and politicians. A noticeable voice of support came from Scottish secretary Ian Lang, albeit cleverly cut in from a tape prepared for the organisation's awards dinner in November.

Approached directly about the survival of Catering Direct, the Scottish Office remains firmly on the fence. "The Government has made it clear that the new authorities should consider all the options open to them, that includes joint boards and MBOs. But the final decision rests with those authorities," said a Scottish Office spokesman.

Ultimately, Catering Direct's future will rest in regional politics. "While a lot of the councillors we've approached accept the logic of what we are saying to them, they also have their own local interests which concern them," says Catering Direct human resources manager Margaret Lang.

With no love lost between the districts and the region, a lot of the new unitary authorities will be pleased to see more services operated locally. "Many have their own local catering organisations which would like to win the school meals business - but they don't understand the size and complexity of our organisation," adds director Avril Robertson.

Strathclyde covers half of Scotland and is an immensely varied region, ranging from the large urban schools of Glasgow to three- or four-pupil schools in some of the islands. So interest in a central catering organisation is likely to differ.

Authorities with smaller, more difficult to serve populations are likely to want to keep with existing arrangements, but some of the more densely populated regions might well choose to go it alone.

Tom Monaghan, chief executive and town clerk of Glasgow City Council, is yet decide on which would be the best route for the new Glasgow unitary council. But he says: "Members of the new Glasgow council will have to ask themselves whether there are benefits in going it alone on catering, or whether it would be better to link into some form of consortium."

Certainly, the existing Strathclyde Regional Council is behind Catering Direct's stance. Bob Gould, leader of Strathclyde regional council, told Caterer: "In my opinion if the organisation was broken up it would disappear, and that would not be in the best interests of the service."