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House of Commons catering could go out to tender in bid to cut costs

11 May 2011 by
House of Commons catering could go out to tender in bid to cut costs

MPs are considering putting prestigious catering contracts at the House of Commons out to tender amid fears that the cost of in-house operations is too great. A new report suggests the private sector could be invited to tender in a bid to cut costs by £1.25m by 2014-15.

Other proposals in the cross-party report Catering and Retail Services in the House of Commons include opening up the catering facilities to the public when the Commons is not sitting, and hiring out the banqueting halls for private functions such as wedding receptions.

It found that the principal reason for the huge losses of £5.7m a year made by the service is the cost of staffing, as a result of irregular working hours and a demand to be fully operational only 34 weeks (65%) of the year.

The industry average for labour costs as a percentage of takings is 28%-32%, according to Oliver Peyton, chairman of caterer Peyton and Byrne, who was consulted by the committee.

the despatch box
But staff costs in the House of Commons' only profitable catering outlet, the Despatch Box in Portcullis House, amounted to 51% of takings in 2009-2010. The committee found that in the majority of the estate's other cafés and restaurants staff costs were much higher than revenue, in the worst case six times as much.

While the committee called on the House of Commons Commission and the Board of Management to address the issue it also scrutinised whether the operation should be outsourced to a commercial contractor.

When it was raised six years ago the Commission rejected a recommendation to investigate the service quality and cost benefits of contracting out, claiming that a contractor would only be interested in taking on the business if it deemed there to be sufficient scope for profitability.

It said: "The need to maintain profitability might in time lead to compromise on service levels. There is no such conflict when the service is provided in-house."

But Peyton told the committee that he has "yet to see a case where [outsourced catering] isn't substantially better than what happens in-house".

He said: "We wouldn't exist if you were better. I think a commercial operator is going to come in; he's going to work with you to deliver the solutions you need, I'm sure to a higher quality and to a better service level than you currently have, because it's the nature of the beast."

the consultants' view
However this isn't a view shared by industry consultants, who suggest that while the private sector would no doubt find the operation attractive, there is little a contractor could do that the in-house team can't.

Chris Stern of Stern Consultancy said: "There is the assumption that commercial operators wouldn't be interested because it's losing money. It would carry on losing money and the operator would pass the bill on to the House of Commons.

"The reason it's in-house is it is big enough to stand on its own two feet as a business. They probably already run the service as lean and mean as it can be, so the benefits a contractor could bring are pretty limited."

Peter Smale of Turpin Smale agreed, adding that the major problem is the constraints of what is required.

"The way to save money would be to review what services are necessary and how they can be delivered more efficiently," he said.

"Diners should be required to pay more commercial rates for the food and the range of services, and opening hours need rationalisation."

Smale went on to say that the only area in which he could see a contractor save money was labour costs, but over a long period of time, because it would have to honour the employee terms and conditions under TUPE.

"Essentially all the measures a commercial operator could take could be taken in-house. The director of catering Sue Harrison comes from a commercial background so she knows what it's all about," he explained. "She's nobody's fool."

MINISTERIAL EATING IN NUMBERS

â- Passholders on parliamentary estate - 13,268
â- Catering/retail staff - 280
â- Meals served a day - over 8,000
â- Sales (2009/2010) - £8.278m
â- Staff costs (2009/2010) - £8.948m

By Janie Stamford

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