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									                                The Royal Borough of Kensington and

                            Key Decision Report dated 18 March 2010

                          For Decision by Councillor James Husband,
                         Cabinet Member for Education and Libraries

                                  Report by the Executive Director for
                                       Family and Children’s Services

                                AWARD OF CONTRACT FOR CATERING
                                 SERVICES IN CHILDREN'S CENTRES,
                                 NURSERIES AND SCHOOLS 2010-13

1     Introduction

1.1   I am writing to seek your approval to recommend to the Governing
      Bodies of three Children’s Centres/Nurseries, 21 Primary Schools
      and two Secondary Schools to appoint Alliance in Partnership Ltd
      (AiP) as the school meals contractor with effect from 28 May 2010
      until the last day of Spring Term 2013 and, subject to performance,
      funding, and risk assessment with the possibility of a two year

2     Background

2.1   The provision of school meals was delegated to schools in April
      2000. At that time the Procurement and Contracts Team which is
      now part of the Commissioning, Strategy and Performance
      Directorate of FCS were requested by the majority of schools to
      draft specifications, appoint and manage catering contractors and to
      subsequently manage their catering service. The Procurement and
      Contracts Team entered in Service Level Agreements (SLA) with the
      Governing Bodies of these schools to deliver a procured and
      managed service on their behalf. The SLAs have been reviewed and
      updated on several occasion since April 2000. Subject to approval of
      the recommendation made within this report the Governing Bodies
      of the 26 have indicated their intentions to continue with these

2.2   Schools Meals are currently provided within the current procured
      and managed service to 17 schools by AiP, eight schools by
      Brookwood Partnership Ltd and one school by Scolarest Ltd. The
      contracts expire on 31 March 2010.

2.3   10 schools have opted to make alternative arrangements but
      generally follow the Borough’s guidance with regards to the charges
      to be made for school meals. All schools, whether or not making

      their own arrangements or as part of the procured and managed
      service received the same sum for a school meal.

2.4   The school meals budget for those schools which opted into the FCS
      procured and managed service in 2009-10 was £2.362 million. The
      Governing Body of Our Lady of Victories School, whose budget is not
      included within the above figure for 2009-10 has requested to join
      the service from 2010.

2.5   Within the delegation formula, schools are delegated the full
      average cost of a free school meal (£3.37 in 2009-2010) and where
      applicable the subsidy offered by the Council for paid meal (£1.52 in
      2009-2010). The school meals budget consists of the Contractors’
      direct costs (86 per cent), a proportion of the Procurement and
      Contracts Team costs to manage and develop the service and
      Central Town Hall charges. The selling price (£1.85 in 2009-2010) of
      a school meal is the difference between the full average cost (£3.37)
      and the subsidy (£1.52). Based on an average of six data returns
      from each school which display the take up of free and paid meals,
      each school is given an annual income target for its paid meals. The
      price of the meals includes every element of service delivery.

3     Need

3.1   The Education Act 1996 provides that the local authority shall, if
      requested to do so by or on behalf of any registered pupils at a
      school maintained by the authority, provide school lunches for those
      pupils; but the authority shall not be required to provide a school
      lunch where in the circumstances it would be unreasonable for them
      to do so, or where the pupil in question has not attained compulsory
      school age and is being provided with part-time education.

3.2   In order to continue to promote consistent high quality standards
      and consonant selling prices the Governing Bodies of 26 schools
      requested that the Procurement and Contracts Team specified and
      managed the services on their behalf. As has historically been the
      case a detailed Service Level Agreement (SLA) setting out the
      responsibilities of each school and the Royal Borough is signed and
      co-terminated with the period of the school meals contract.

3.3   The school meals contracts when formed are between the appointed
      contractor and the Governing Body of each school or the Governing
      Bodies of a cluster of schools where the schools share a kitchen (“a
      production kitchen”). Since the contractor was last let in 2005, four
      schools have new or fully refurbished kitchens and are no longer
      reliant on another school kitchen for the production of its food.
      Three further schools are scheduled to have new kitchens within the
      next year. Whilst the services provided to the four schools with new
      kitchen facilities have significantly enhanced there has been no net
      gain to the cost of providing the service.

4     Consultations

4.1   Healthy fresh cooked meals have been a feature of the specification
      provided within the Royal Borough for 15 years. All the menus
      within the primary schools and secondary schools are compliant with
      the Nutritional Standards for School Lunches 2001. Lunch, tea,
      supper and/or snack menus within the Nursery Schools and
      Children’s Centres are fully with the recommendations of Caroline
      Walker Trust.

4.2   The updating of the service specification and tender documents in
      readiness for the tendering process took account of feedback of
      forums including the Dietetics Department of the PCT (a dietician
      was seconded from the PCT to the Procurement and Contracts
      Management Team), the Healthy Schools Forums, the School
      Nutrition Action Group (SNAG), meetings with parents, teaching
      staff, pupils and governors. The following are examples of
      adaptations made to the specification:

             a requirement for more seasonal fruits and vegetables on the
              menu. (The requirement of fresh organic fruits and
              vegetables has therefore been diluted to allow for this menu

             introduction of organic bread;

             notification to schools of their compliance to legislative food
              and nutrition standards;

             use of free range eggs, chicken and turkey;

             introduction of food waste management and re cycling.

4.3   Schools requested to continue with a Framework Menu from which
      local variations can be requested to suit community needs and
      suggested that the period of the contract should be repeated as
      before at a three year term with a two year extension period subject
      to performance.

4.4   A rigorous contract compliance system which has been continuously
      improved over ten years was included within the document. The
      tender documentation was approved internally by legal services
      department before dispatch and contained provision for a £120,000
      bond or a parent company guarantee.

4.5   In order to encourage the maximum number of Tenderers to submit
      a bid, tenders were sought on an open basis where every Tenderer
      who had expressed an interest was invited to bid.

5     The Tender and Assessment Process

5.1   The procurement and tendering        processes were directed and
      managed by the Procurement          and Contracts Team of the
      Commissioning, Strategy and         Performance Directorate and
      conformed to all aspects to the     Council’s Procurement Code of

5.2   A pre-purchase review was approved in August 2009 It was not
      necessary to procure this service using EU procurement procedures
      as Catering Services are exempt from this provision. A hard copy
      advertisement seeking expressions of interest was placed in the
      Caterer and Hotel Keeper in September 2009 and remained on line
      for three further weeks.

5.3   Tenders were dispatched to 22 catering organisations that answered
      the advertisements. The criteria against which the tenders would be
      evaluated and the weightings attached to each criterion were
      published within the tender documents and are set out at Appendix
      1. 65 per cent of the overall score was attributed to the quality of
      the service offered and 35 per cent of the overall score was
      attributed to price.

5.4   On the tender return date of 2 November 2009
      Councillor Campbell signed in six full tenders.

5.5   The tender evaluation panel (the Panel) consisted of:

      5.5.1 an Independent Financial Analyst and Auditor;

      5.5.2 the Contractor Quality and Standards Manager FCS;

      5.5.3 School Meals Catering Contract Compliance Monitor, FCS;

      5.5.4 the Procurement and Contracts Manager, FCS.

5.6   The three FCS officers are trained to advanced level and collectively
      have thirty years experience in Nutrition, Health and Safety, Food
      Hygiene, Operational Catering and contracts auditing and

5.7   The tender evaluation timeframe allowed for a full tender document
      analysis, interviews and site visits to each Tenderers site.

5.8   The Independent Financial Analyst and Auditor did not participate in
      qualitative evaluation. The Contractor Quality and Standards
      Manager and the School Meals Compliance Monitor participated only
      in qualitative but not the financial scoring. The Procurement and
      Contracts Manager participated in the qualitative scoring until that
      part of the exercise was completed. This was a precaution to avoid
      any person, scoring on quality, to be influenced by price. The
      Procurement and Contracts Manager subsequently carried out a full
      analysis of the Tenderers financial bids with particular emphasis on
      the terms and conditions of the one hundred and fifty staff that
      would be eligible for transfer under TUPE regulations. All four
      officers were present at all meetings with the Tenderers. The bids
      were marked individually by each member the panel taking into
      consideration the tender submissions and responses to questions
      raised at interview.

5.9   The tender evaluation process took longer than the original
      timetable had allowed for due to errors and subsequent follow up
      arising from the terms and conditions of employment of the 150
      staff entitled to transfer under TUPE. It was considered by the Panel
      that this further investigation was acceptable in order to reach a
      firm conclusion and be confident about the actual cost of providing
      the service over the period of the contract.

6     Results of the Tender Evaluation Process

6.1   A summary of the Tenderers combined qualitative and financial
      scores are set out at Appendix 1. The figures used for tender
      comparisons were actual service take-up figures from 2009-10.

6.2   One clear leader emerged from this process with the top combined
      Quality and Price Score of 75 per cent – Contractor A (one of the
      three incumbent contractors).

6.3   The acceptance of this bid can be contained within the current
      budget. Efficiency savings of approximately £30,000 may be realised
      from the second and subsequent years subject to the ratio of free
      and paid meals being consumed and the uptake of the total number
      of meals remaining relatively constant. The tender allows for three
      fully staffed new kitchens which are currently being refurbished,
      built or at the design phase, to be fully staffed and operational.

6.4   Notes from the Panel regarding the other five tenders are set out at
      Appendix 2

6.5   It is recommended that the revised starting date for the new
      contracts would be 28 May 2010 thus allowing sufficient time for
      TUPE transfer of the staff, the decommissioning of the existing
      providers and the mobilisation of the new contracts. This would
      require a seven-week extension of the current provision and is
      unlikely to cause disruption to the services.

6.6   Subject to approval of the recommendations all Tenderers will be
      informed on the same day of the outcome of the tendering period.
      Although this tender is not one which required to be exposed to
      European procurement rules, as a matter of good practise, the
      Council allows for a ten day response period from unsuccessful
      Tenderers. Subject to no delays in the process arising from an
      unsuccessful contractor complaining, schools will be informed of the

      outcome of the tendering exercise and a decommissioning schedule
      will be executed with the outgoing contractors and a mobilisation
      plan implemented with the incoming contractor which will include
      the TUPE transfer of approximately 150 staff.

6.7   Thereafter a copy of each contract will be sent to each school/cluster
      of schools for signature and countersigned by the successful

7     Options

7.1   The options are threefold:

      7.1.1 to award the School Meals Contract to Alliance in Partnership
            Ltd (AiP) (Contractor A);

      7.1.2 to request that individual schools tender for their own

      7.1.3 bring the service in-house. If no suitable contractor is
            appointed and a school or school clusters brings the catering
            service in-house, it is likely the staff would transfer to the
            school to which they were regularly assigned to work under
            TUPE regulations. This would not be cost effective as the
            terms and conditions of employment of approximately 150
            staff would be enhanced.

8     Financial, Legal, Sustainability,       Risk,   Safeguarding     and
      Equalities Implications

8.1   The total cost of free school meals and the subsidy provided towards
      paid primary school meals forms part of the delegated schools

8.2   The delegated funds that the schools within this contract pay for
      their meals is linked directly to the amount that they get in the
      schools funding formula. As a consequence of this any changes in
      the contract cost requires a change to the amount delegated to all
      schools regardless of whether they are part of the contract or not.

8.3   It is also worth noting that a new formula for funding three and four
      year olds including those within primary and nursery schools is likely
      to be introduced in 2011-12 (the Early Years’ Single Funding
      Formula). We may be able to keep funding for free school meals and
      school meals subsidy within the main funding formula in primary
      schools, however the existing funding formula will cease to exist
      altogether for nursery schools. The new Early Years’ Single Funding
      Formula will not have factors for free school meals or school meals
      subsidy. A price will thus need to be quoted for providing meals to
      these children independently of the funding formula.

8.4   The recommendation set out at Option 1 above can be contained
      within the available budget and will potentially realise efficiency
      savings of £30,000 per annum for each year of the contract.

8.5   The recommendation set out at Option 1 means that the selling
      price of a school meal could remain during 2010-2011 at £1.85 and
      the cost of the meal and the subsidy would be reduced to £3.23 and
      £1.38 respectively.

9     Legal

9.1   The Council’s scheme for financing schools provides that schools
      must abide by the Council’s financial and contract regulations in
      letting contracts and that certain contract arrangements within the
      scheme may be delegated to individual schools. In this instance 26
      schools have requested that the Contracts Team let these contracts
      on their behalf. The contracts would subsequently be managed by
      the contracts team on behalf of the governing body of each school
      under an SLA.

9.2   The Contracts will be signed by the Governing Body of each of the
      schools involved if they decide to accept your recommendation
      contained in this report.

9.3   Under the Councils contract regulations, school contracts over
      £100,000 in value must also be counter signed by the Council unless
      you use your powers within the constitution to waive that
      requirement. If the Council does not seal the contract a third party
      rights clause in its favour should be included within the contract.

9.4   Where the Governing Body of any school with a delegated budget
      enters into a contract it arguably does so on behalf of the Council
      who must assume liability in the last resort for any breach. This
      situation has not arisen since the provision of school meals were
      delegated to schools in April 2000.

10    Sustainability

10.1 Tenderers were required within their submissions to provide detailed
     proposals with regards to environmental and other sustainable
     issues. The recommended contractor submitted proposals with
     regards to the supplies of fishstocks, proposes the introduction of
     electrical transport commits to working in partnership to reduce the
     CO2 emissions from school kitchens, to introduce food plate waste
     reduction schemes, food recycling schemes, and to actively
     participate with the green agendas of the schools and the Royal

11   Risk

11.1 The School Meals Service was transferred to the Council from the
     Inner London Education Authority (ILEA) and was originally operated
     in–house. During the intervening years the service has been
     outsourced several times. When last market tested in 2005 there
     was little interest in the school meals market. In order to stimulate
     interest five individual “packages” were tendered, each containing a
     certain number of schools. Three contractors were appointed for
     individual packages.

11.2 Since 2009, perhaps as a reaction to the publicity associated with
     school meals the market became more buoyant. During this recent
     tendering exercise 22 expressions of interest were received and six
     contractors, including two incumbent contractors, submitted full

11.3 The recommended contractor has a wide spread of approximately
     110 other school meals contracts terminating between three and
     eight years. The spread of operational and business risk has been
     optimised intentionally so that if several contracts were lost the
     business would not be at risk. Their cashflow projections are sound
     with some clients paying for staff and overheads in advance and
     cash being collected on line from parents and/or through other
     electronic means.

11.4 The Royal Borough’s independent financial agent states that AiP is
     financially strong and that with their spread of other contracts
     across a wide base, regular open book accounting appraisals and a
     Performance Bond of £120,000 the Company represents a low risk.

12   Personnel

12.1 Changing a provider in any schools will have TUPE implications. The
     Transfer of Undertakings Protection of Employment Regulations
     2006 (TUPE) will apply to these contracts. Where necessary some of
     the 150 staff currently employed by the three existing contractors
     would transfer to the recommended contractor on the same or
     enhanced Terms and Conditions of Employment. It is imperative
     that the transfer of each member of staff from one contractor to
     another is correct to avoid any future potential claims of mishandling
     such a transfer. The FCS Procurement and Contracts Team had
     spotted potential liabilities arising in this respect and delayed the
     recommendation process until the anomalies had been corrected.

12.2 The recommended contractor has considerable experience of
     undertaking TUPE transfers of staff. Subject to approval of the
     recommendations contained within this report, initial indications are
     that the commencement date of the contract will be delayed for
     approximately six weeks, until the end of the first half of Summer
     Term 2010.
12.3 If a school decides that it no longer requires a service at some point
     in the future, the contractors will pay the costs associated with the
     period for which they have employed the staff.

13   Equalities and Diversity

13.1 The appointed contractor will be required to facilitate the Council’s
     statutory duties in relation to equality and diversity in performance
     of the contract.

13.2 The appointed contractor will be required to provide Halal food if
     requested to do so by the governing body of a school. No other
     religious group has expressed a requirement for other ethnic
     foodstuffs. Should that situation arise a variety of food preparation,
     storage and pricing issues will require to be addressed by the
     governing body of each school.

14   Safeguarding

14.1 A detailed Safeguarding clause was included within the Tender
     documentation and the recommended Contractor confirms

15   Recommendation(s)

15.1 I recommend that:

     1.    the contract for the provision of school meals for 2010–13 is
           awarded to Alliance in Partnership Ltd (AiP) A as specified at
           Appendix 1 and that

     2.    the Executive Member waives the normal requirement for the
           Council to seal contracts referred to in paragraph 2.14 of the

                             John Wilkinson
          Director for Commissioning, Strategy and Performance

                            Anne Marie Carrie
             Executive Director for Education, Libraries & Arts


Date of first appearance in Forward Plan: 21 August 2009

Key decision reference identifier from Forward Plan:

Background papers:
Tender Documentation
Officers’ own working files
Tender received from contractors
Tender evaluation summary sheets

Contact officer:
Collette Le Van Gilroy, Procurement and Contracts Manager
Tel: 0207 361 3344 Email:


Report published on: 19 March 2010

Report circulated to: the Family and Children's Services Scrutiny
Committee on 19 March 2010

Cleared by Finance (officer’s initials)   TG
Cleared by Legal (officer’s initials)     SM


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