A government food initiative that could improve the quality of school and hospital meals has awarded a £100 million contract to the procurement arm of the catering giant Sodexo.
The deal by the Cabinet Office with Entegra, a subsidiary of Sodexo that says it is the largest food group purchasing organisation in the world, has the aim of streamlining public sector food and drink procurement and bringing more small and medium-sized enterprises (SMEs) into the government’s supply chain but keeping prices keen and raising standards.
The merits of the multi-year contract are contentious, however, and food wholesalers and distributors have labelled it as anti-competitive and claim that it will add cost and could lock out more SMEs than it helps. James Bielby, chief executive of the Federation of Wholesale Distributors, said: “[Entegra] are a middle man where no middle man is needed.”
The Crown Commercial Service (CCS), the central government buying agency, awarded the contract to Entegra in late January, saying that up to £100 million of food and drink ordered by public sector bodies could go through its new buying platform, which will be live later this year. It is a trial and, if successful, could lead to more of the £2.1 billion spent each year on food being organised via the platform. It will be open to buyers from organisations such as hospitals and schools as well as central government departments with large food and drink requirements, such as the Ministry of Justice and Ministry of Defence.
The CCS said the deal, known as the buying better food and drink agreement, aimed to “drive up standards” by requiring any suppliers on the platform to meet the government’s minimum levels. At the same time it wants to support food producers, shorten supply chains and help public bodies to meet their carbon net-zero targets.
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Simon Tse, chief executive of the CCS, said: “This food solution will support public sector bodies in purchasing good-quality food and help local and small businesses compete for public sector contracts for the first time, opening up economic opportunities.”
Stephen Beech, managing director of Entegra UK & Ireland, said the portal would combine “a nationwide network of distributors, producers, farmers, growers and manufacturers with innovative technology and efficient processes, which has the potential to transform public-sector buying and create value for many SME businesses”.
It is the CCS’s first foray into the procurement of food and drink by public sector agencies. Entegra will create a single outlet, which will go live later this year, where suppliers can list their wares and public sector buyers can see the social, economic and environmental impact of their purchasing.
Equilibrium Markets, a food supply chain technology specialist based in Bristol, is part of the consortium formed by Entegra to win the bid. Rich Osborn, its chief executive, said the initiative was “good news for all national and regional suppliers of food and primary producers across the UK”. He added: “They are looking to significantly improve the inclusivity of public sector food procurement for SMEs, both producers and suppliers. The bidders for the contract had to give assurances that we are going to be able to provide better access to the public sector market for farms and SMEs, wholesalers, both national and regional, and food processors. That is what we specialise in.”
He acknowledged that purchasing organisations such as Entegra were best known for “commanding very good pricing for buyers”. The new portal would only be used by buyers if they could source products at a competitive price, he said. “You still need to be producing efficiently, but what this will do is create much greater transparency so it is a more open market. Typically buyers look at the name of the product, the weight and the price, that is it. That has led to a race to the bottom.
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“But as standards come out in the public sector demanding higher environmental, social and economic performance, if farmers can show what their performance is on that, then procurers in central government departments will be mandated to act on that. So it won’t just be about price.”
He said that farms had previously not been rewarded for supplying this information and that it usually disappeared into a black hole. “Buyers don’t get access to it, so they don’t use the information to make informed decisions. Now the intention is to use that spend to recognise farms that are doing things right. For instance, farms that are sequestering carbon, improving biodiversity, having healthy soil and water and really high levels of animal welfare. All of those things can now be recognised with our bid.
“It will help to encourage and give a market to farmers who are farming more in harmony with nature and producing really good-quality food that meet the government buying standards that are expected to come out this year.”
The Federation of Wholesale Distributors represents about 600 distribution companies. Bielby questioned why the portal was needed when other buying frameworks already existed. “The distributors can do all this directly,” he said. “They don’t need to work with a broker. They already have relationships with the suppliers and the public sector buyers. It is adding in another layer and will lead to more cost.”
The government could improve the quality of school and hospital meals by increasing the budgets that schools and hospitals have to spend, he added, rather than spending money on a broker such as Entegra. “It won’t lead to economies of scale so it won’t mean they will be able to buy things more cheaply. If anything it is more likely to be more expensive.”
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The CCS has recently released its small business plan, which shows that the number of SMEs on purchasing agreements has risen from 5,400 in 2018 to 6,000 as of February last year. These companies shared business worth £3.6 billion. The CCS said, however, that only 25 per cent of those firms had ever won any work from being part of a framework. “There is still more to do across government to make sure that these SMEs are awarded a greater share of the work,” it said.
CCS opportunities of above £12,000 are published on Contracts Finder. The Find A Tender Service lets businesses search and apply for high-value contracts, which are above £138,760, including VAT.
