If done well, the outsourcing of catering provision allows schools to benefit from expertly run catering facilities, delivering the highest standards of service. By working with catering providers, schools are often able to share in the financial and operational efficiencies that come from providing services of this nature at scale.
However, if the arrangements are not carefully thought through, you can find yourself locked into contracts which represent poor value, and which potentially expose you to significant risks. We look here at some recurring issues which we see in school catering contracts, and outline how best to manage them.
Contracting on standard terms
It often makes good sense to use the provider’s standard terms as the starting point for your contract. They will have been developed to reflect the way in which the catering provider delivers its service, and the provider will be resistant to ‘re-inventing the wheel’ with each of its clients.
However, whilst the provider’s standard terms may be a good starting point, that is all they are. Often, providers’ standard terms are not prepared with the particular needs of schools in mind, and they are almost always slanted (to varying degrees) in favour of the provider.
You should ensure that you understand the terms that you are presented with, and that you challenge and revise them where appropriate.
Perhaps surprisingly, it is common to see catering contracts that don’t contain coherent provisions setting out how to calculate the school’s payment obligation. Common practice is to append a budget for catering services to the agreement, without enough thought being given to how that budget translates into the fee payable by the school.
This is a particular failing in catering (and cleaning) contracts, in part because of the relatively complex pass-through of variable costs which are common in many contracts of this type.
Would someone reading your contract for the first time be clear as to what fee is payable in what circumstances? If not, you are storing up a future dispute if you don’t clarify that mechanism at the outset.
Catering contracts often require the provider to invest in upgrading facilities (and to recover that cost through its fees for the service provision).
It is important to make sure that you are comfortable with who owns those assets, and what happens to them on termination or expiry of the contract. Does the school have the option to (or is it obliged to) purchase those assets? At what cost? If the assets are owned by the provider, are the parties clear as to who is responsible for insuring those assets?
Is your contract clear about the basis on which the provider is providing the services? If meals are treated as being sold to pupils by the provider (rather than the school) it is likely that the provider will need to account for VAT on those sales. However, most schools are able to make sales of school meals on a VAT-exempt basis.
In order to take advantage of this VAT exemption, the provider will often act as an ‘agent’ for the school in the sale of the meals. This mechanism is familiar to most catering providers, but it is important to make sure that the drafting giving effect to this works as intended.
Remedies for poor performance
Sometimes, your high expectations of what a provider will deliver are not met. This can be a result of the provider not performing as promised, but it can often be a result of the parties not being clear at the outset as to the service delivery expectations.
Have you included measurable targets which you can assess the provider against? Are there objective deliverables which you could point to as having not been met, if the provider falls short of your expectations?
Ensuring that you and the provider are clear (and that the contract reflects) what is being delivered, and to what standards, is key. If you don’t have this clarity, it will be very difficult to bring the arrangement to an end early if the service provision does not meet your expectations.
Catering contracts usually contain some safeguarding provision, but often not enough to satisfy a school’s regulatory, or wider safeguarding, obligations.
Individuals working in the catering function will be ‘staff’ of the school for regulatory compliance reasons even if they remain employed by the provider. The school will therefore be responsible for ensuring that catering staff have been subject to the same pre-appointment checks as its directly employed staff (catering staff will almost always be carrying out regulated activity).
Your contract should require the provider to carry out those checks before an individual can commence work at the school, and you should ensure that compliance with this obligation is policed. You should also ensure that the contract allows you to remove catering staff from the premises if they are deemed unsuitable to work in a school setting.
A lease or a licence?
The provider will need to occupy the kitchen in order to provide the services. There are two main options for the basis of this occupation – a licence or a lease. Which one is the most appropriate will depend on the way the provider occupies the kitchen.
A lease will be appropriate if the provider has ‘exclusive possession’ of the kitchen. Does the provider exercise control over the kitchen areas at all times, preventing school staff from entering? Does it have its own commercial catering equipment installed in the kitchen?
If so, a lease may be more appropriate.
If the provider is simply permitted to use the area, but the school controls the kitchen and how it can be used, then a licence is more appropriate. In our experience, a licence is the more common approach.
In either case, it is important to ensure that the catering contract makes clear that the provider’s right to occupy and use the kitchen, ends when the arrangement as a whole comes to an end, as well as dealing with other practical issues (such as access, damage and the cost of utilities).
Where a new provider begins the provision of catering services, it is likely that there will be a transfer of catering staff from their current employer to the new provider. Ensuring that the obligations of the school are clearly set out, and that the liability of the school and the provider in respect of those employees is fairly allocated, is an important function of your agreement with the provider.
Similarly, many catering contracts pass the cost of employing catering staff directly through to the school. Again, ensuring that the school’s liability for those costs is appropriate is an important (but often overlooked) role of the catering contract.
Catering provision is an important, and expensive, part of the ‘shop window’ of schools, and as such they undertake a rigorous process to select the provider which best meets their needs. Getting these issues right, and ensuring that you and the provider are clear as to how you will work together, should help to ensure that your relationship with your catering provider is a positive one.
Ed Rimmell is a partner at leading education law firm Veale Wasbrough Vizards.