Public Sector Food Procurement Initiative (PSFPI)
Smarter food procurement in the public sector - National Audit Office report
This report by the National Audit Office was published on 30 March 2006 and identifies areas where there
is significant scope for delivering sustainability and nutritional quality in public sector food procurement in
a more efficient manner.
The report comprises:
- Smarter food procurement in the public sector
(on NAO website)
The report shows how public sector bodies can maintain or improve the quality of the meals they serve
while controlling or reducing their costs and, in doing so, focuses on measures which can also benefit,
or at least have neutral impacts on, levels of customer service, sustainability, and nutritional quality.
- Smarter food procurement in the public sector: Case Studies (on NAO website)
The case studies examine the role played by organisations at different levels in the delivery chain,
from department level down to frontline delivery within schools, hospitals and Armed Forces bases,
covering the following key areas:
- (1) managing demand;
- (2) developing food buying and preparation skills;
- (3) designing a catering service for the needs of the organisation as a whole;
- (4) engaging intelligently with suppliers;
- (5) meeting the objectives of the organisation and the needs of customers;
- (6) improving efficiency by streamlining transaction processes and reducing overhead costs.
- Smarter food procurement in the public sector: a good practice guide (on NAO website)
The guide explains what public organisations need to do to improve their food procurement d rawing
on good practice in the public and private sectors.
Note. The NAO has also published a report covering catering in the prison service entitled
“Serving Time: Prisoner diet and exercise”. (www.nao.org.uk/publications/nao_reports/05-06/0506939.pdf)
Recommended savings
The NAO report identifies efficiency gains and savings totalling £240 million by 2010-11, e.g. through
aggregating purchasing, increasing competition, adopting best practice, developing expertise in food
procurement, making better use of food purchased and maximising turnover and revenue.
These are summarised in Appendix A.
But makes the points that :
“The scale of the efficiency savings outlined does not necessarily mean that the public sector
can cut its spending on food and catering services. The efficiency savings could help finance
much needed improvements in the quality of the services provided and, in so doing, help the
Government in the steps it is taking to improve public sector food.”Executive summary: paragraph 7
“Increasing aggregated purchasing is a clear method of raising efficiency, and the trend within
the public sector is likely to be in this direction; this makes it all the more important that [Defra]
works with others to explicitly address the best ways in which to combine this with meeting
sustainability objectives.” Report: Paragraph 2.31
Scope for delivering sustainability and nutritional quality more efficiently
The report identifies 5 areas where there is significant scope for delivering sustainability and nutritional
quality in public sector food procurement in a more efficient manner:
- Streamlining and prioritising objectives (especially those that are inexpensive);
- Tackling barrier of higher costs more intelligently and innovatively
- Providing strategic support to bridge the gap between procurers and suppliers
- Addressing shortfalls in skills and infrastructure; and
- Using marketing and education to boost demand.
Public Sector Food Procurement Initiative (PSFPI)
Section 2 of the report covers steps taken under the PSFPI to encourage public sector bodies to
purchase food and manage their catering contracts in a manner that promotes sustainable
development and opens up opportunities for local and UK suppliers.
It recognises Defra's joined up approach to implementing the PSFPI and, in assessing its performance,
observes that much has been achieved, while much still remains to be done. It also calls on
others to help Defra deliver the PSFPI:
“It is crucial that public sector procurers of food (particularly those departments and
agencies responsible for significant amounts of catering provision) give assistance to
Defra to deliver the Initiative’s objectives.” Executive Summary: paragaph 14.
Facts, observations and recommendations
The report contains a number of facts, observations and recommendations helpful to driving forward
the PSFPI and other related Government initiatives such as on improving school and hospital
food. One of these is that public procurement of food and catering services in England is now
worth about £2 billion. Others include:
-
“Increasing efficiency can have a positive impact on sustainability and nutrition, by enabling
organisations to use cost savings in some areas to help to finance improvements in others“.
Executive summary: paragraph 6. -
“There is significant scope for improvement in increasing joined up procurement, raising the
professionalism and efficiency of catering operations, and increasing take up and revenue through
investing in and marketing the service provided.” Executive summary: paragraph 12. -
“Buying produce directly from local producers, food manufacturers, or wholesalers, can in certain
circumstances lower prices, either by cutting out other levels of the supply chain, and the
charges made at those levels in order for them to obtain their profit, or by simply reducing
transport and storage costs.” Paragraph 1.10 -
“In some cases it is possible to recycle savings into further improvements to the service, so
that cost savings in some areas help to finance improvements in sustainability and nutrition
overall. For example, savings resulting from better checks on the goods delivered can be
used to improve the quality of ingredients purchased.” Paragraph 2.2. -
“Aggregation of public sector demand should not automatically mean aggregation of supply.
Procurers may need to assess the longer-term impacts of the sustainability and contestability
of the market when deciding how their package of requirements should be presented to
the market. Paragraph 2.9 -
Certainly, the aggregation of demand need not put small local suppliers at a disadvantage.
For example, the requirement of a proposed contract can be split into "lots" during the tendering
process (where this does not compromise value for money) and the lots tendered at the same
time, so allowing small and medium enterprises to bid for certain parts of supply contracts. The
lots can be split in a variety of ways, for example by product or distribution area, with suppliers
able to bid for some or all lots. This approach can bring benefits to the contracting authority
since it enables smaller suppliers to develop competencies, reduces risk of over-reliance, and
helps to address any lack of competition . Paragraph 2.9 -
Allowing for lots and then communicating this fact effectively among local and regional
businesses can be a potentially effective method for furthering local food and ensuring security
of supply, as demonstrated by the NHS Purchase and Supply Agency in breaking their
frameworks (for example in respect of meat) into regional lots”. Paragraph 2.9 -
“There is large scope for increasing the energy and water efficiency of public sector catering
operations. For example, some 77 per cent of respondents to our survey did not have separate
metering in their kitchens to allow them to measure the electricity, gas, and water consumption
of their catering service. Installing such metering is an important first step towards increasing
resource efficiency, to both reduce direct costs and environmental impacts such as carbon
emissions (although smaller organisations should balance the costs associated with the
installation of metering with the potential for savings)”. Paragraph 2.12. -
“Public procurers need to seek the most efficient means of increasing sustainability and
nutritional quality, in order to lever the greatest outcomes from the funds they use”. Paragraph 2.16. - “Where contracts have been let on the basis of lowest price alone rather than overall value
for money, this has had inevitably negative impacts on the quality of the food produced. As an
illustration of the longer term costs this can impose, i n some cases schools and local authorities
are locked into long term or inflexible contracts where necessary variations (for example to meet
the revised nutritional standards to be set out by the Department for Education and Skills)
may be expensive or difficult to secure.” Paragraph 2.19.
Appendix A
Efficiency gains and reducing costs
Number of opportunities for efficiency gains and reducing costs (totalling £224m by 2010-11)
identified in Part 2 that NAO say should also benefit or, at least, have neutral impacts on levels
of customer service, sustainability and nutritional quality:
- £40m (by 2010-11) from reduced costs for the same or better quality food products, e.g. price
of a pint of milk varies from 17 pence to 44 pence. - £30m (by 2010-11) from estimated £95m routinely obtained by major catering firms for routine
volume discounts of around 12% and year-end rebates of about 3%. - £80m (by 2010-11) from aggregating demand to reduce procurement costs and increase
- purchasing power. Just over half of public sector bodies (excluding schools sector which is
more fragmented) do not engage in any joint buying with other public bodies – despite 44% using
at least 2 of the same major suppliers. - £40 (by 2007-08) from more professional receipt and storage of food, menu design and meal
preparation. - £1m (by 2007-8) from managing catering operations to reduce waste and use of energy and
water. There was little evidence of public bodies passing utility costs to the contractors, which
might incentivise them to increase onsite resource efficiency. Some 77% of respondents did
not have separate metering for their kitchens and there was no evidence of public bodies
passing on kitchen utility costs to their caterers. - £33m (by 2010-11) from increasing the take-up of school meals. Estimated £4m as the
difference made in revenue between two LEAs with a comparable number of pupils where the
take-up of school meals in one was 55% and 38% in another.
Defra Food Procurement Unit
30 March 2006
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Page published: 30 March 2006