Does a catering tender work?

Problems are cropping up in the current catering tender process and small organisations are potentially missing out. 

MD & Principal Consultant of Catering Consultancy Bureau, Peter Pitham, explores the current process. 

When a client needs or wants to review their catering arrangements there are normally a number of catering organisations to assist in the process which is often managed by a catering consultancy organisation. They manage the client’s required brief to those catering organisations that meet the brief and the client’s requirements. This often leads to some disappointment with the organisations not invited to tender but it saves time and money.

The tender process ensures a level playing field for all caterers and asks for specific information in order to evaluate their ideas and approach. Investment is often not a requirement at this stage and so it is not included as clients are open to just what will be proposed. It’s important to encourage the caterer and client to speak with each other to ensure that both parties have a clear understanding of each other’s expectations. This approach isn’t adopted by all consultants but it ensures that any emotional influences are highlighted at the commencement of the project.

The tender progresses until it reaches a short list of two or three catering organisations and a series of presentations and site visits are undertaken. A final shortlist is identified and the final arrangements on the mechanics of the catering contract are negotiated. This may involve refurbishment, investment, or other arrangements that need to be agreed prior to the final contract being awarded.

This is often where the problems start. Clients are normally tasked each year to make a financial saving on areas under their control, and this could include catering. Using an example, a client may have two catering organisations in a tender – a larger major player and a small company, competing. They offer similar proposals, presented designs and ideas for the catering operation and have made offers of investment.

The tender has been structured and controlled throughout the process, so it’s unusual for there to be a great difference on the financial side. The level playing field and clarification questions all assist in this matter. The smaller of the two companies offers a loan to the client which is interest free over the period of the contract, normally three years, with it payable through the trading account. This pleases the client, but may not be as great as they think.

The larger company, whose finances are very similar, propose a similar refurbishment programme and investment. They offer a greater amount of investment to cover all aspects of the refurbishment, provide it interest free over the life of the contract, and also provide it as a gift with no payback required.  This leaves the client in a dilemma. Often, smaller companies have the approach – “I own the company and it is me that you deal with”, together with, “we can address any problems that you have immediately as we don’t have the big company red tape to deal with.” Larger companies however have a slightly different approach and bring their operations director into the tender process. At the conclusion of this process they announce, “this is your operations director who you know”.

At this stage I suspect that clients need a pretty good reason to go up their management chain to say, “both caterers are broadly offering the same but I am going to appoint the smaller company to whom we have to pay back the loan, as opposed to the larger company who are giving us the investment as a gift”. This can often run into hundreds of thousands of pounds.

The result is often that the smaller company finds it difficult to compete and so the award goes to the larger company. During these processes consultants are asked for their advice. They provided a response based on the tender submissions, infrastructure, most appropriate fit and make no reference to investment. However, despite this input, the smaller company is normally still disappointed and may have spent around £10,000 on the project. Going back to square one can be very difficult.

In a recent conversation with a smaller organisation they raise the question that this process could be one of the reasons why there has been a downturn in new companies entering the market? It is an interesting point and for those who do enter, they often struggle for a while and then present themselves as a potential “buy” for a large player.

Several caterers have mentioned that they normally decline a tender which requires investment. It’s a shame and at the same time, smaller caterers are now actively looking for other markets outside of Business and Industry. Thankfully the initial requirement for a caterer to invest heavily in a facility is declining and is often something that is offered in an effort to secure a contract without any prompting.

The catering tender still offers opportunity but it can be a difficult process. I’m not sure if it still work as effectively and it is something more are beginning to raise. This is very much the case of ‘watch this space’.