Examination of Witness (Questions 214-248)
HAMISH COOK
13 DECEMBER 2010
Q214 Chair:
Good afternoon, Mr Cook. Thank you very much indeed for coming
to see us. I gather you may have recently arrived back. Is that
correct?
Hamish Cook: I
had a few days in Australia a couple of weeks ago.
Q215 Chair:
Thank you very much indeed for making time in your no doubt crowded
diary to be with us. You have had some understanding of what
we are trying to do here: to try to make some sense of the catering
facilities. You've had some experience of how they do it in both
Australia and New Zealand, which I think is going to be of particular
relevance to us. Would you like to start by making any general
observations?
Hamish Cook: Thank
you very much. As outlined in my profile, I've been employed
by the Australian facilities services company Spotless for the
last 22 years. My roles with Spotless have certainly focused
my attention on the outsourced catering industry and service markets
in Australia and New Zealand and, more recently, in the United
Kingdom. I commenced with Spotless in the late 1980s, working
in fine dining restaurants within the arts and cultural centre,
and also within corporate Australia. Since then, I've spent time
in senior management and executive roles, overseeing businesses
in Australia, New Zealand and, more recently, internationally.
The vast majority of my time has been spent working
in commercial, business and industry, education and age care markets,
and working with corporate clients as well as government clients
at all levels of government in Australia and New Zealand. During
my time with Spotless, I have had small roles with Spotless consulting
to the Parliament of Australia, when they outsourced their catering
in the early 1990s, and more recently I've been part of our project
team that was involved in retendering for the New Zealand Parliament
business a couple of years ago. I have some experience in those
environments, and I've certainly looked at other government catering
services that have been in house and outsourced at a state level
within Australia.
Having researched the scope of your inquiry, I feel
the relevant parts of my experience would be the management and
outsourcing of staff function, retail and tourrelated activities,
because I've had experience in Australia and New Zealand in those
areas. My experience in assisting corporate and government clients,
reducing catering subsidies and working on projects to do that
in large complex environments would also be relevant to the team
here. Whilst my comments today reflect my experience working
at Spotless, they will be related to myself and personal views,
as opposed to those of Spotless. Obviously you will understand
that some of the requirements of contracts with clients will limit
what I can say about the specifics of some arrangements with our
clients in Australia. Thank you.
Q216 Chair:
Thank you very much indeed. Presumably every parliament building
these days has to be regarded as needing special protection, and
the more one opens the doors to members of the public, the more
there is a security aspect to it. Given that that is a fundamental
issue for an organisation that is operating perhaps between 30
and 35 weeks a year as an active sitting parliament, do you think
there is any golden rule as to whether it is better to have an
inhouse arrangement or to outsource the catering facilities?
Hamish Cook: For
a successful inhouse or a successful outsourced arrangement,
the key is for the inhouse team or the outsourced team to
clearly understand what the security requirements are. Our large
corporate clients, our large government or nongovernment
clients, all have security concerns, whether that is because of
intellectual property requirements, or whether it is because they
work in sensitive areas themselves. It's about the relationship
that an outsourced provider has with the organisation, and understanding
what the rules are regarding access to and egress from those properties.
Q217 Chair:
So you think it could be done either way?
Hamish Cook: It
could be done either way, definitely.
Q218 Bob Russell:
I wonder if I could follow up your question because the briefing
we were given says: "Mr Cook was part of the team responsible
for delivering the catering services to the Parliament of Australia
and the New Zealand Parliament. Both Parliaments outsource their
catering services." Was part of your briefing the fact that
security was a consideration, and was that security anything like
the security we have here?
Hamish Cook: When
I was involved in outsourcing for the Australian Parliament, which
was in the early 1990s, security was certainly a factor. Staff,
whether they're in house or our employees, all need to go through
appropriate security checks. That's just a process that needs
to be managed and it needs to be in line with anybody coming into
this environment.
Q219 Bob Russell:
So it's not an insurmountable problem?
Hamish Cook: Definitely
not.
Q220 Mr Watts:
Hamish, did your work in the Australian Parliament mean that parts
of the parliamentary building were off limits and some were not,
so that the public was directed a certain way? Was there a need
to secure certain parts but not others?
Hamish Cook: I
think I would struggle to answer that regarding what's going on
in the Australian Parliament now, but certainly, having been a
recent visitor with my daughter to the Australian Parliament,
there are public areas and there are areas that are quite clearly
out of bounds.
Q221 Geoffrey Clifton-Brown:
Absolute figures are not going to mean a lot to us, but could
you say in both the New Zealand case and the Australian case what
percentage saving they made from switching from an inhouse
operation to an outsourced operation, and would you expect the
same percentage savings to be made here or can you see that there
are factors over here that are different?
Hamish Cook: I'm
probably not in a position to answer that question, because I'm
not privy to the exact pre and post figures.
Q222 Geoffrey Clifton-Brown:
What percentage savings would you expect might be applicable here?
Hamish Cook: I
don't know because I'm not privy to your current financial arrangements.
Q223 Nigel Mills:
Perhaps we can try to get at the same thing in a different way.
You said that you have experience of reducing catering subsidies
in complex organisations. What do you think are the key things
you need to do to achieve that?
Hamish Cook: The
initial starting point with any cost management project is, certainly,
clearly understanding what it is you want to achieve. In catering
activity, there are generally different customer bases that have
different expectations and needs. That may be staff; it may be
executives; it may be function users. Whether it's a corporate
client or a government client, it doesn't really matter. You
need to understand what has to occur in each of those functions.
It may be that you want to subsidise your staff dining. It may
be that you want to run a commercial function business, because
the only alternative is to go outside, and you may want to offset
subsidies in those instances. It's very clearly about understanding
what you want to achieve at the outset.
Once you get into a project to reduce costs, it's
then working out, if I look at staff dining, what you want to
subsidise as an organisation. Many organisations that we work
with these days are very happy to subsidise main meals and food
that is produced on site. They don't want to be seen to be subsidising
retail items like bottles of Coke and chocolate bars. Therefore
they will have a different pricing structure in those instances,
and it's managing that. For executives that may have a different
requirement and a need, because they work late and have meetings
outside of work, you can provide a different level of service
again, and there may well be no cost or cost transfer to recognise
that. The cost is providing the service.
If I look at government institutions—parliaments
and the like—I think you'd be saying that the Members would
have a requirement and it would be expected that you would have
a subsidy in those environments. Staff may have a subsidy, but
the subsidy may relate to the fact that there's no rent charged
for that space, and the prices are therefore discounted by the
equivalent of what you may pay as rent on the high street. You
may want to run a function business that generates income to offset
those subsidies for those other two parts of your business.
Q224 Nigel Mills:
Do you recall whether the Australian or New Zealand Parliaments
allowed people to pick and choose which outlet they went to?
Here we have subsidised outlets for staff, but also you can take
in visitors and use them in some situations. Would you envisage,
generally, that you would be trying to restrict some outlets for
some uses and some for other uses? Would you recommend continuing
that kind of crossuse?
Hamish Cook: You
need to clearly define the purpose for each outlet. There is
not necessarily a requirement to limit who can go to some outlets.
You may decide that staff can't go to where the Members dine,
but there should be nothing to stop Members or guests, general
public excluded, going to the staff cafeteria because that's where
they want to dine. What you want to do is make sure that people
clearly understand the main purpose for that outlet and understand
that the menu is for that purpose, not necessarily trying to make
sure that every outlet offers every range of food.
Q225 Chair:
How easy is it? I can remember more clearly the geography of
the federal Parliament in Australia in relation to the rest of
Canberra. I've only been to the present New Zealand Parliament
on one occasion and I can't just now recall how close other outlets
were to it. One of the problems we have here is that Members,
if they are not facing an imminent vote, can very easily reach
outlets of different kinds and that takes away business. Are
Australia and New Zealand in your experience slightly different,
because it's not quite so easy to get out of the building? Therefore,
there is a better footfall.
Hamish Cook: Australia,
as you know, is quite removed from other retail outlets, so it's
probably a car journey or a bus journey to go to local competition.
From where the New Zealand Parliament is located, in downtown
Wellington, it's very easy to get to other retail outlets.
Q226 Chair:
In the New Zealand Parliament then, do they fill, or get a satisfactory
level of takeup in, their dining rooms?
Hamish Cook: I
haven't seen the most recent figures there, but my understanding
from my colleagues in New Zealand is they get good usage, yes.
Q227 Chair:
Here one of the difficulties seems to be that the business of
the House can vary, even from night to night, with a dramatic
effect upon the numbers of people who come in. I just wonder
from an outsourcing point of view whether anyone contemplating
making a bid to provide those services could overcome some of
those handicaps, when you can't necessarily substitute a different
type of trade to fill the empty tables.
Hamish Cook: Like
operating any catering service, knowledge about custom, practice
and what goes on is crucial for success, for instance, in the
sporting arenas in which we operate. You build up that knowledge
over a period of time, and therefore manage the business accordingly.
Q228 Mr Watts:
I think I take from you, Hamish, that the first thing you would
think that needs to be done is to identify what is the purpose
of every cost centre and it's important that you have the information
about what that cost centre costs, including any central costs
that are determined. That's where you should start.
Hamish Cook: That's
where you should start.
Q229 Mr Watts:
As has just been said, the very difficult thing we have is that
sometimes it's busy and sometimes there's nobody there. Is that
going to put off anyone who is a contractor, because he or she
does not know the level of revenue that is going to be derived
from each of those outlets?
Hamish Cook: I
think the contract catering industry or the outsourcing industry
have a level of understanding on how to operate staff facilities,
and that would be driven by total staff numbers available. They
would know how to run a retail outlet that is open to visitors,
based on the number of visitors that you measure coming through
the facilities on an annual basis. I think the challenge would
be the Members' dining area, because it is driven by changes in
House sittings and Government business. Once again, that would
be manageable over time, because I imagine that there are trends
in how the House sits and how the business performs over a period
of time.
Q230 Geoffrey Clifton-Brown:
It obviously takes time to get to know how a new business works.
In Australia and New Zealand, what was the length of contract?
Hamish Cook: The
process in Australia was that they went through a consultancy
process, I imagine similar to what you're currently doing, for
about a sixmonth intensive period. The business was then
put to a formal tender and was let on a fiveyear basis initially.
Geoffrey Clifton-Brown:
Five years?
Hamish Cook: Yes.
Q231 Geoffrey Clifton-Brown:
Was it for all catering services, including for example shops?
Did it include a range of services?
Hamish Cook: The
initial contract that we operated there included the staff cafeterias,
the retail outlets open to the public, the Members' dining room
and Parliament services to Members' offices and the like, and
then the function and special event business that went alongside
that.
Q232 Geoffrey Clifton-Brown:
Presumably there were special remits for special restaurants,
Members' restaurants or whatever. What was the general basis
of charging allowed?
Hamish Cook: I
just can't remember that. It was on a per head basis.
Q233 Geoffrey Clifton-Brown:
It impinges on the Chairman's question. Was your general level
of services at, above or below what could be obtained if you could
get a taxi ride or a bus ride elsewhere? It's very easy to put
the prices up and make a huge profit, but then you're going to
drive everybody out and they'll go elsewhere.
Hamish Cook: It
was some time ago; I can't remember.
Q234 Geoffrey Clifton-Brown:
What was the basis for dealing with complaints? It's all very
well outsourcing but, if you're going to get a lousy service,
how was that dealt with?
Hamish Cook: I
might talk about how, in the outsourcing arrangements, we would
generally deal with complaints and/or feedback from customers.
There are shortterm complaints regarding quality of food,
quality of service that need to be addressed at the point of service,
because that's the only time we could fix something like that.
There is then contractual performance, which is best managed
in a meeting forum on a regular basis, whether that be weekly,
monthly or quarterly, with our clients. That is based around
key performance indicators or criteria that are set when the contract
is set up, and then regularly reviewed to make sure that they
are still current. Some of those KPIs might be around food service,
customer service; they may be around food quality. It may be
around the transparency of the relationship and the responsiveness
of the relationship managers or team providing the services back
to a committee or client.
Q235 Geoffrey Clifton-Brown:
Was all your food prepared fresh or was some of it prepared elsewhere
and brought into the estate?
Hamish Cook: These
days the contract catering industry relies on a combination of
readytoeat or readytocook food that's
prepared off site, and that may mean that you procure great curries
from a particular provider because they are specialists there,
and then you will cook them on site, prepare them on site and
present them in a professional way. It may be that you get some
of your pastries and bakery items off site, but then you will
prepare a range of products—main courses, daily specials—on
site as well. It's a combination of both.
Q236 Bob Russell:
Who employs the staff in the Australian and New Zealand Parliaments
now they've been outsourced? Who is their employer?
Hamish Cook: The
contract provider.
Q237 Bob Russell:
When they were outsourced, did they inherit staff from the respective
Parliaments or were those people made redundant and new people
came in?
Hamish Cook: In
the Australian Parliament, which we took on from the inhouse
operation, we took over a range of people; we didn't take over
all people. Some were made redundant or redeployed when we went
through that process. In New Zealand, we took over from another
outsource provider.
Q238 Bob Russell:
The reason I ask that question is that, having been involved in
local government, where grounds maintenance and whatever were
taken over by one outsourcing company and they took on the staff,
with what we call in this country TUPE arrangements, and then
another contractor in four or five years' time takes over, and
the staff get passed around as if they are commodities rather
than human beings.
Hamish Cook: That
comes down to the maturity of the outsourced organisation. We
would like to think, when we take over employees, that they get
treated as our longstanding employees. In our organisation, we
would recognise their service from the commencement of service
at that location, not just their commencement with our organisation.
Q239 Bob Russell:
This is hypothetical at the moment obviously but, if that did
happen here, there would be no loss of benefits, length of service
and so on, if there was a contractingout.
Hamish Cook: The
TUPE requirements would indicate that that has to continue.
Q240 Chair:
How long have the outsourcing arrangements existed in Australia
and New Zealand?
Hamish Cook: I'm
not sure about New Zealand. Australia outsourced their catering
in Parliament House in the early 1990s.
Q241 Chair:
Presumably from the fact that that is still going, although maybe
not necessarily with the same contractor, the Members of Parliament,
as well as other users, have been broadly satisfied.
Hamish Cook: Yes.
Q242 Chair:
The contractors must have been as well. For all the disadvantages
of trying to operate within a building that does not have a constant
attendance, the contractor has been able to come to an arrangement
that is sufficiently profitable for it to be worth doing.
Hamish Cook: Yes,
I would assume as much.
Q243 Chair:
So what we see as the obstacles here, in your experience, can
be overcome?
Hamish Cook: Definitely.
Q244 Nigel Mills:
When you're trying to reduce subsidies, in what sort of cost areas
generally do you expect to find the easiest savings that you can
bring into play to meet your new budget? Is it procurement or
staffing levels or is it income generation that you look for?
Hamish Cook: The
art in going through a subsidy reduction project is to look at
the supply chain, and by that I mean look at what items could
be more effectively produced off site, rather than on site. It
is certainly looking at the opening hours and the services offered
in each outlet. There needs to be a review of what each outlet
exists for. There needs to be a review of what outlets are open
at what times of the day for what types of service. There should
be no expectation that every outlet is open from daybreak until
the close of business. When you clearly understand how people
behave in this environment, where they want to go and how long
they're going to be working here, you can put together a picture
and make some recommendations to refine what's going on, but I
would suspect that there would be labour savings and there would
be efficiency savings in food production by going off site.
Q245 Mr Watts:
I don't know if you've had a chance to study the commercial and
event revenue from this place. In a professional view, if the
security issues could be resolved and the surplus time that this
place is empty could be maximised, do you think that there's a
major opportunity to actually reduce the overall subsidy?
Hamish Cook: I
haven't seen the financial figures here so it would be somewhat
hard to make a comment on that. We as an organisation operate
in large town hall and government facilities, where there are
local councils or city councils that have requirements to block
off facilities for various times of the year. It's about understanding
when the rooms are available and understanding the rules around
booking functions. You could definitely run an effective function
or event business in this environment. It may not operate 365
days a year; it may only operate 150 days of the year, but you
could generate income out of that.
Q246 Mr Watts:
In comparison to other facilities that you run, how attractive
would this be as a proposition?
Hamish Cook: I've
only walked through the main entry. However, the facilities are
impressive. The history associated with this, I would imagine,
would be very easy to sell.
Q247 Chair:
As a contractor to a parliament, did you have any kind of interface
with your customers through, say, a committee like this one, which
has the responsibility for services to Members, or was your interface
directly with them as customers, be they Members of Parliament,
be they staffers or whoever?
Hamish Cook: There
is a businesstocustomer interface every time they
come into a restaurant or book a function. There is that level
of relationship that goes on, and I think that's where you need
to hear feedback immediately about the service that's provided.
My only comment about the senior relationship would be that,
if there is going to be an outsourced arrangement, there need
to be senior people who are managing that process to start with
and ongoing to ensure that every stakeholder is effectively heard
and issues can be dealt with quickly and effectively.
Q248 Chair:
Is there an inevitable drive by a contractor to try to ensure
that you are making the most money from the assets of the building
you're operating in, bearing in mind that you could probably charge
more for banqueting functions involving members of the public
who are coming in to enjoy the particular venue and so on? Is
it inevitably the case that banqueting will start to edge in much
more?
Hamish Cook: I
think the relationship between a contractor and the client needs
to be open and transparent. Both parties need to clearly understand
why the service exists and what the desire for revenue growth
is. Decisions should be made together rather than just the caterer
trying to maximise revenue themselves. Our organisation would
generally work very closely and in a transparent manner with our
clients, and provide them with the information regarding revenue
and, in many instances, costs, so that our clients can make decisions
with us that benefit the longterm sustainability of the
business.
Chair: Thank you very
much indeed. We greatly appreciate your coming to see us.
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