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NAO sees savings in catering procurement

06 April 2006
NAO sees savings in catering procurement

Contract caterers could save schools, hospitals and defence services £30m a year if they didn't conceal bulk discounts, a study by the National Audit Office (NAO) has found.

The Government spending watchdog's report Smarter Food Procurement in the Public Sector said deals should be scrutinised more closely due to "the widespread lack of transparency in contract caterers' charges".

It found caterers commonly earned 12% in rebates - worth £95m a year. It concluded that public sector organisations could, through more joined-up negotiations, share £30m of the discounts.

Food service consultant Chris Stern underlined the lack of sophistication in the public sector when buying food and catering services - worth about £2b a year.

"Procedures are often followed in a very blinkered way. A pre-qualification document may ask if a contractor is insured for people when they are up a ladder, rather than whether it guarantees the best prices," he said.

The NAO calculated the public sector could claw back a total of £224m a year by 2010-11 with better procurement practices (see table). Suggestions include shopping around (£40m per year) and combining procurement services to improve purchasing muscle (£80m).

Diana Spellman, managing director of purchasing consultancy Partners in Purchasing, said it was not easy to do either. "A lot of people have got themselves tied into three- or five-year contracts, which is not a smart move. They can't look around for better prices, even if they wanted to," she said.

Kevin MacKay, chairman of the Local Authority Caterers Association, said the recommendations were contrary to Government thinking.

"Recommending large-scale purchasing agreements is not helpful in the current climate of encouraging local suppliers into the sector - as set out in the public sector food procurement initiative from the Department for Environment, Food and Rural Affairs," he said.

The NHS purchasing and supply agency said using local suppliers could also be problematic. A spokesman said: "It has to be noted that using national contracts is not mandatory, so choices can be made locally, resulting in the variations found in the report."

Recommendations and savings

NAO recommendationAnnual saving
Shop around £40m by 2010-11
Improve bulk discount transparency £30m
Join forces to boost purchasing muscle £80m by 2010-11
More professionalism and use of outside expertise £80m by 2010-11
Reduce environmental costs £1m in schools by 2007-08
Increase uptake £33m in schools by 2010-11

By Tom Bill

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