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School catering: improving financial efficiency

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Last updated on 19 December 2016
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In-depth article
How can we improve the financial efficiency of our school's catering provision? We link to guidance from the National Audit Office (NAO) and relay advice from one of our associate education experts. We cover such topics as in-house and out-sourced catering, food waste and pricing structures.

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Contents

  1. 1 In-house vs outsourced catering provision
  2. 2 Consider menu choices and food waste
  3. 3 Supplies and suppliers: finding efficiencies
  4. 4 Consider your staffing needs
  5. 5 Review your pricing structures
  6. 6 Using joint purchasing arrangements
  7. 7 Achieving catering savings: case study

Article features

  • 3 external links

We spoke with one of our associate education experts, Martin Owen, about how schools can save money on their catering provision. We relay his advice below.

In-house vs outsourced catering provision

Martin explained that the first consideration when looking for efficiencies in the catering budget is whether the school’s catering is provided in-house or by an external contractor.

If the school uses an external contractor (such as a local authority service or a private catering service), it can put the service back out to tender. A competitive tender can help schools compare multiple catering services and find those that are providing best value for money.

Schools might ask bidders how they could improve the quality and efficiency of the catering service the school currently provides

He added that, as part of the tender, schools might ask bidders how they could improve the quality and efficiency of the catering service the school currently provides.

In 2006, the National Audit Office (NAO) produced guidance on food procurement in the public sector.

On pages 6 and 7, the document sets out some pros and cons of providing catering services in-house or contracting them out. For example, the benefits of contracting out the catering service include:

  • Contractors are primarily responsible for service delivery, cash handling and compliance with nutritional standards and health and safety regulations
  • Contractors should be able to negotiate better prices for ingredients
  • Contractors are likely to have better technical knowledge and catering expertise

However, points against contracting out catering include:

  • It may be difficult to establish how much contractors spend on ingredients or how costs are calculated
  • It may be difficult or costly to get contractors to be responsive to specialist needs
  • Where contract terms are inflexible (for instance, nutritional standards), changing requirements can leave organisations vulnerable to price increases
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Tendering for goods and services

You can find more information about procurement and tendering in other articles from The Key.

You may be interested in templates and examples of invitations to tender, or advice on good procurement practice.

Consider menu choices and food waste

Martin explained that the choices that a school places on the menu can have a large impact on the efficiency of the school’s catering budget.

For example, if the school has too many options on the menu, and many items have low take-up, the school is likely spending money on food that is ending up in the bin.

Streamlining the menu can help reduce food waste and save the school money on the cost of supplies.

The guidance from the NAO, linked to above, has a section covering the efficient use of purchased food. On page 25, it suggests questions to consider when designing a menu. For instance, does the menu:

  • Consist of long-running cycles of dishes (enabling bulk purchasing)?
  • Take advantage of seasonally available produce (and avoid items that are out of season and therefore expensive to buy)?
  • Adhere to costed recipes?

Supplies and suppliers: finding efficiencies

Martin advised that it is important to ensure that you get value for money for catering supplies, and this will require looking at contracts for different suppliers.

If the school uses multiple suppliers, it may be possible to reduce costs by procuring all of the necessary supplies with one supplier.

It may be possible to reduce costs by procuring all of the necessary supplies with one supplier

The NAO guidance, linked to above, says on page 4 that organisations should assess their catering requirements. For example, it may be possible to:

Reduce expenditure by removing unnecessary provision or scaling back excessive specifications, for example removing the requirement for class 1 fruit and vegetables where class 2 will do.

It adds that buying the same sizes and brands of the same product from fewer suppliers can simplify administrative processes and reduce costs through bulk buying.

On page 14 of its guidance, the NAO warns against false economies, saying:

When comparing alternatives it is essential to bear in mind the ‘whole life’ cost of the goods or services. For example, using the cheapest ingredients can lead to high amounts of wastage and offer less value for money than using higher grade ingredients.

The guidance gives the example of unfrozen lean mince which yields a higher proportion of meat compared with cheaper, frozen mince, which can contain more water and fat.

Consider your staffing needs

Martin told us that staffing costs have a large impact on school catering budgets and that, in his experience, many school kitchens are overstaffed.

This may be related to the service the school is providing. For instance, if schools are providing too many menu options, this creates additional work that requires additional staff. Streamlining the menu can help reduce the number of staff the school may need, or the number of hours those staff need to work.

Schools should look at the budget for staffing the catering service, and see if the staffing structure can be reorganised to create efficiencies.

Making a loss on catering operations

A member asked us whether it is allowed for a school to make a loss on catering operations.

Martin told us that while this is legally possible, it is not recommended for a school to be making a loss on catering.

If the catering provision is in-house, the school would have to allocate other financial resources to cover the shortfall in funding. If the provision is outsourced, the contract would specify whether the school is liable for any further contribution. 

Martin recommended that schools try to avoid making continuing losses through the catering function, as this diverts funds away from other educational provision.

He said that catering provision can even be managed in such a way that it returns a profit to the school, and recommended that schools review their processes to find an efficient way of funding catering provision to break even, as a minimum.

Review your pricing structures

Martin said that schools should assess their pricing structures to ensure that they are covering the costs of the meals they are providing.

He added that schools should check to make sure that they are not providing free or discounted meals to pupils who are ineligible.

Using joint purchasing arrangements

The NAO’s guidance, linked to in section 1 of this article, covers joint purchasing on page 16. It says that joint purchasing can lead to savings through:

  • Lower food prices due to increased purchasing power
  • Higher discounts due to increased volumes
  • Reduced procurement and administrative costs

Martin explained that multi-academy trusts (MATs) and federations of schools are well-placed to use joint procurement strategies, both for food and for other catering services, as a result of shared governance structures.

However, he said that schools outside of MATs or federations can also set up joint procurement arrangements. Groups of schools in the same geographical area can sometimes save money by reducing transport costs.

He added that primary schools can often benefit by entering into joint procurement arrangements with secondary schools, because secondary schools are often larger and have greater buying power.

Achieving catering savings: case study

We spoke to Kai Muxlow, the school business manager at Kaizen Primary School, about how the school has saved money on school catering. Kaizen Primary School is a community school in Newham.

Kai told us that the school managed to save £10,000 by switching from cartons of milk to using bottles provided by a local dairy wholesaler.

He explained that the school did not have much time to prepare for the requirement to provide milk for all pupils, which came into force on 1 January 2015. As a result, it did not have adequate time to source the milk at the lowest possible price.

The school ... approached ... wholesalers to see if it could procure the milk it needed at a lower price

The contract the school entered involved purchasing enough cartons of milk for each pupil, with many of these going to waste.

To save money, and prevent waste, the school approached a number of local shops for information about dairies and dairy wholesalers who supply the local area. The school then approached these wholesalers to see if it could procure the milk it needed at a lower price.

Kai said that the school now has a supply arrangement in which milk is delivered to the school twice a week in large bottles. Pupils can then pour the milk from the bottles into cups. This allows pupils to take only the amount of milk they want, rather than giving them a whole carton they may throw away.

At the end of a week, the school can also sell any unused volumes of milk back to the wholesaler.

Kai recommended that schools review their contracts regularly, and speak to relevant local businesses, who may be able to recommend suppliers.

Sources

Martin Owen is a chartered accountant (CPFA). He has more than 20 years' experience working with academies and schools to improve their governance, leadership and management of financial, business and operational processes.

Another publication from the NAO looks at case studies of how school or local authorities have improved the financial efficiency of school catering services:

This article was updated in response to a question from the school business manager of a large secondary school in London.

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