Tough financial times call for creative thinking in all aspects of the school system’s budget. School Superintendent, Dr. Michael Murphy wants to take a closer look at food services in the Clarke County School System.
Currently, all food preparation and management is handled entirely by school staff. The system has come under scrutiny because food services in Clarke cost more than they generate in revenue. In the 08-09 fiscal year food services lost $49K. This year the school budget has made provisions for it to lose another $40K. In addition, upkeep on aging equipment is also impacting the school budget through capital expenditures. Over the next two years the school system will need to invest $40K in kitchen equipment just to maintain the existing level of service. Faced with all of these financial challenges, Dr. Murphy wants to pursue the possibility of out-sourcing food services for the schools. The Superintendent made a brief presentation to the school board this week in the hope of gaining the board’s approval to create a Request For Proposal (RFP) to out-source food services.
“This is not about firing employees. It is simply about looking differently at one part of our organization,” said Murphy. Seeking to frame the effort the superintendent said, “This is about starting a conversation.” He added the RFP would allow the school system to see if any vendors are interested in providing solutions and that receiving proposals does not commit the schools to any course of action, but instead provides options.
The case for out-sourcing
Based on previous experience with Sodexo, Dr. Murphy agreed to allow the food service management company to prepare a detailed assessment of Clarke County food services. The information he received was presented to the board and contained financial analysis of the cost centers and shortcomings of the current system. The budget numbers from the school system that were provided are below:
- Student Body Enrollment of Clarke County Schools: 2,185
- Total Meals Served: 214,593 – Breakfast 18,524 – Lunch 196,069
- Total revenue $616,745
- Expenditures on food: $291,148
- Management Expense: $46,117
- Production Labor Expenses $279,653
- Total Labor : $325,770
- Other Expenses: $48,759
- Total Expenses: $665,679
- Cost per Meal: $3.10
- Total Return or (Loss): -$48,934
Sodexo’s comments after analyzing this data against their typical performance and national averages were presented to the board and were as follows:
- Breakfast participation is at %5 which is very low.
- Lunch participation is very low at %49. Average lunch participation is over %70 in Warren County (a neighboring county where Sodexo provides food services)
- Revenue per student is currently at $1.54. Average revenue per student should be over $2.00
- Increasing the number of entrees offered daily, along with improved marketing and packaging, would allow for increased revenue very quickly.
- The meals per production labor hour is very low at 11.22. Sodexo averages 20-22 meals per labor hour. Revenue could be increased with a %20 reduction in labor.
- The cost of labor is high at %45 of revenue against an anticipated norm of %38 for other Sodexo accounts
- Labor force could be reduced through attrition.
After presenting the plan and the data to the board, the subject was opened to public comment and the response was swift. Focusing largely on the labor issues and the potential loss of jobs, school Nutrition Supervisor Tammie Braithwaite was the first to speak. She requested that the board consider allowing the existing staff to address these issues and be given a fair chance to correct shortcomings. She also pointed out data that required closer scrutiny and broader attention. Specifically, the low breakfast consumption could be traced back directly to bus scheduling. Braithwaite pointed out, “If students arrive 5 minutes before class they can’t buy breakfast.” In closing, she said that staff was willing to cut back hours and make other concessions to address the current shortfall and that she believed if the staff is given the time and resources to address the issues, she is confident that they can develop an efficient system that will deliver quality at a sustainable price.
Next to speak against the idea was Director of Business for the Clarke County School System, Mr. Edward Breslauer. His primary objection was he felt seeking an RFP was moving ahead without sufficient research. His appeal to the board was to research the idea of outsourcing and assess it on its merit. He pointed out that findings in an RFP by companies seeking to do business with the county would be skewed and could not constitute or replace actual research. Breslauer suggested the board interview school divisions who had previously contracted food service companies and have since elected to drop them noting, “no one provides bad references” when submitting an RFP.
The board discussed the matter and all agreed that labor was a key issue. Dr. Murphy pointed out the school could dictate that management positions for a food service contract be filled from current staff, and that in any contract agreement the school has the ability to add terms as they see fit
The board agreed to allow the development of an RFP while concurrently pursuing independent research on the feasibility of out-sourcing.