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EGF - Stage 1 - 071 - NHS Lothian Catering - Bid

DescriptionSTATUS - UNSUCCESSFUL - To create a large scale shared Catering Production Unit (CPU) and associated central distribution and local regeneration facilities to meet public sector needs for the provision of safe and nutritional meals for patients, clients and staff,primarily, but not exclusively in the areas of health and social care.
Official Print Publication DateJuly 2005
Website Publication DateMarch 14, 2006


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    Stage 1: Application - Transformation of Catering Operations

    Bid number (for EG use)

    Lead bidder

    NHS Lothian
    John Jack - 01506 419 666, john.jack@wlt.scot.nhs.uk

    Brief description of the aims of the project

    This radical transformational project aims to create a large scale shared Catering Production Unit ( CPU) and associated central distribution and local regeneration facilities to meet public sector needs for the provision of safe and nutritional meals for patients, clients and staff, primarily, but not exclusively in the areas of health and social care.

    Clear description of what the EGF money would be used to buy

    The partners to the bid anticipate that the construction of the Catering Production Unit ( CPU) would be undertaken on the basis of a PPP/ PFI type arrangement and therefore Efficient Government Funding will not be sought for this aspect of the Project.

    EGF funding would be used to support the other key local project elements identified below, which do not lend themselves to being packaged as part of the CPU construction PPP/ PFI.

    1. The creation of a Central Distribution Unit or units ( CDU) to facilitate the distribution and delivery of meals from the CPU to end user locations;
    2. Re-configuration of local catering facilities in end user premises (hospitals, care homes etc) to facilitate receipt, regeneration and in-premises distribution;
    3. Technical input/consultancy on the design and location of new facilities, statutory planning , transport logistics, assessment of existing infrastructure in partners end user premises etc;
    4. Technical input/consultancy for menu planning, nutritional analysis, procurement strategy etc;
    5. Financial and Legal input for creation of PPP type contract arrangements for main production facility;
    6. Staff and management re-training, re-skilling, re-deployment, terms and conditions rationalisation etc;
    7. ICT infrastructure and systems;
    8. Communications and consultation and
    9. Project Management

    Partners to the project likely to commit resources

    NHS Lothian

    NHS Lanarkshire

    City of Edinburgh Council

    East Lothian Council

    Names of Other Organisations with whom the project has been discussed

    NHS Borders

    Midlothian Council

    West Lothian Council

    Scottish Borders Council

    Evidence that suggested approach has been deployed successfully elsewhere

    The use of large scale Cook Freeze/Cook Chill catering production facilities for Hospital Catering has become increasingly common within the NHS in England, as Hospital Trusts seek to address increasing demands for food safety, nutrition, choice and efficiency.

    NHS Lothian currently receives such a service as part of the Edinburgh Royal Infirmary PFI contract and two smaller scale facilities designed to meet the internal needs of Clackmannanshire and Dundee Councils have also recently been developed.

    Are there any restrictions to potential for enlargement of the project ( i.e., technology, number of partners, etc)

    In principal, the proposed approach could be extended across the public sector in Scotland, but the ability for this to be delivered from the proposed Central Production Unit would be dependent on physical production capacity of the facility.

    Efforts would be made during the Stage 2 process to identify the range of other potential users of the facility in order to determine the optimum size.

    Benefits projected from the project

    In addition to the sustainable efficiency savings set out in the following section, the project will deliver the following range of other non-financial benefits.

    • Significantly enhanced quality of catering service to patients/clients/staff through enhanced nutritional value, menu choice and food safety.
    • Supports closer integration of Health and Social Care Services already underway within partner organisations.
    • Ability of shared service to attract/afford scarce skills/expertise ( i.e. chefs, dieticians, nutritionists, procurement, operational management etc)
    • Supports partner organisations' efforts to meet the Clinical Standard Board Scotland/Audit Commission standards for catering services and comply with continually increasing food hygiene regulations.
    • Potential to locate Central Production Unit in area of high unemployment to support local regeneration
    • Supports sustainable development objectives of local food sourcing and reduced food transport mileage.

    Estimated financial projections











    Overall Project Costs *



    Estimated Projected Benefits **





    * CPU construction costs are assumed to be covered by PPP or equivalent arrangement and therefore not included as project costs (see bid narrative for more detail)

    ** Benefits shown are net of estimated CPU annual PPP or equivalent charges (see narrative for more detail).

    Is a pilot required - see guidance notes


    Additionally: why is EG funding required

    While it is anticipated that the construction of the proposed shared Catering Production Unit would be attractive to the private sector on the basis of a PPP or PFI type arrangement, there are significant other implementation costs associated with the project which do not lend themselves to such an investment vehicle.

    Efficient Government Funding is sought to contribute towards these costs, which cannot be met from within existing partners budgets.

    Is this project complementary in anyway to other EG work

    The proposed Catering Production Unit would pool an estimated £5 million purchasing of food and meal related items from the bid partners, contributing to the Efficient Government's objectives of streamlining procurement in the Public Sector.

    Is "stage 2 development funding" requested?

    Yes. See cover note.

    Narrative Bid - Transformation of Catering Operations

    1 Objectives behind the application

    The Partners to this bid are seeking to implement a radical transformation of their approach to the delivery of catering services, through the adoption of a shared public/private approach to delivery, which is linked to the drive for closer integration of Health and Social Care services being adopted by a number of the partner organisations.

    Health and Local Authorities face increasing demands from legislation, standards bodies and public expectation for catering services that produce high quality, nutritional and safe food, while at the same time offer value for money. Many of the existing facilities within these organisations are failing to meet these demands and require significant investment to address this gap. Individually, organisations are also finding it increasingly difficult to attract and retain the necessary skilled staff to operate their existing dispersed and fragmented catering production facilities.

    Partner organisations have identified that these demands are best met by adopting a modern, shared public/private approach to catering production. This will minimise the collective investment required to achieve a consistently high quality standard for meals, combined with significant efficiency savings as a result of economies of scale and more productive ways of working.

    The partners aim to make best use of their collective expertise, combined with the commercial and technical expertise of a private sector partner, to deliver a model of best practice in Catering production for Scotland.

    It is considered that the proposed approach and the resulting benefits could be expanded beyond the partners to this bid.

    2 The Essential Elements Of The Project

    2.1 The Physical Infrastructure

    The project requires the creation of key elements of physical infrastructure as illustrated in the diagram of the Cook Freeze Service Model below:-

    Cook Freeze Service Model

    • Central Production Unit ( CPU)

    A large scale facility producing cook freeze meals and hand held foods on a batch production basis. Centralisation and production techniques allow for economies of scale, improved consistency of quality standards, greater control of food safety and hygiene. Enables partners to recruit and share access to expert Chefs, nutritionists, dieticians, and operational managers. It is anticipated that this facility will be constructed by a private sector partner and made available for operation by the public sector partners on the basis of a PFI/ PPP type arrangement.

    • Central Distribution Unit/s ( CDU).

    One or more distribution units will be required to take output from CPU and delivering to local end user premises (hospitals, care homes etc).

    • Local Premises.

    Existing partner facilities are not configured to operate in a centralised production model and investment is required to modernise facilities and configure them to best meet the needs of end users.

    2.2 Other Essential Project Elements

    In addition to the creation of the above physical infrastructure assets, the project will require investment in the follows areas.

    • Technical input/consultancy on facilities related issues

    Implementation of the above infrastructure in the most effective manner will require a detailed assessment of partners existing facilities followed by significant technical input in relation to facility design, location, planning issues, transport logistics etc. It is anticipated that much of this expertise will require to be bought in from specialist consultancy sources.

    • Technical input/consultancy on food related issues

    To achieve the highest quality output, the project will require technical advice from experts in aspects of food production ranging from nutrition and menu planning, to ingredient procurement and food production techniques.

    • Financial and Legal input

    It is anticipated that external legal and financial advisors will be required to assist with the structure of the PPP/ PFI contract and the setup of the shared Public Sector organisation for delivery of the service.

    • Human Resources/Training input

    The catering transformation that will be delivered by the project will involve significant changes in the skills needed and working arrangements for managers and staff, in comparison to the current situation. This transition will require significant investment in training and other HR input related to staff re-deployment and rationalisation of terms and conditions etc.

    • ICT infrastructure and systems;

    The operation of this shared centre will be underpinned by modern ICT systems allowing efficient plant operation and procurement, and effective communication with end users for meal/menu planning and scheduling and delivery.

    • Communications and consultation

    A transformational project of this nature will require investment in communications and consultation with project stakeholders, in particular with the affected staff groups and their representatives.

    • Project Management

    Due to the complexity and scale of this project it is anticipated that involvement of experienced project management resources from within the private sector will be sought to support effective project delivery.

    3 Proven approach

    The basic cook freeze production model shown above is a tried and tested and is becoming a standard approach to delivering cost effective and high quality catering services, primarily delivered by private sector organisations. One of these currently provides catering for the NHS Lothian's Edinburgh Royal Infirmary Hospital, as an integral part of the PFI contract. There are no large scale suppliers in Scotland however and meals for the Edinburgh Royal Infirmary are delivered from Wales, with obvious negative impact on environmental sustainability.

    The partners to this project aim to take this proven and modern approach to catering production and create a large scale facility in central Scotland. It is anticipated that a private sector partner would construct the facility and contract with the public sector partners on a PFI/ PPP type arrangement but the facility would be staffed by public sector employees, albeit on terms and conditions that reflected the new ways of working necessary for the operation of the facility. Initial consultations have already taken place with staff side representatives within NHS Lothian on such an option and a favourable response has been received.

    It is considered that such a joint public private approach to the delivery and operation of the facility will combine the most appropriate skills and ethos from the two sectors, while allowing public sector control to ensure that non commercial aspects such as local sourcing, regeneration and responsiveness to user needs can be fully addressed.

    4 Background to Financial Projections

    The table below sets out the current base line for service demands and staff and food costs for the committed partners to this project.

    Table 1: Base line demand/costs

    Sector / Location

    Annual No. of Meals ('000)

    Annual Food Value (£'000)

    Annual Labour Costs (£'000)

    Annual Food & Labour (£'000)

    Health *

    University Hospitals

    Primary Care & Community

    West Lothian


















    Total Health





    Local Government

    East Lothian

    City of Edinburgh














    Total Local Govt





    Total All Sectors





    * Excludes Edinburgh Royal Infirmary, Wishaw General and Hairmyres General Hospitals all covered by PFI contracts, but some potential for these to be included in the future.

    A summary of the forecast efficiency savings resulting from project implementation are shown in Table 2 below. The reduction in food costs shown reflect the anticipated impact of improvements in procurement processes, and increased operational efficiencies, reductions in waste etc. Significant improvements in labour productivity are anticipated as a result of a move from local to centralised production, batch production methods and the application of best practice in areas of staff training, catering management and production and distribution processes.

    Table 2 - Forecast efficiency savings



    Anticipated Change

    Financial Impact (£'000)

    Annual Food Costs (£'000)




    Annual Labour Costs (£'000)




    Net Revenue Impact (£'000)


    A breakdown of the estimated costs of the project elements detailed in section 2 above, together with the efficiency benefits, and projected until 2009/10 is shown in Table 3 below:-

    Table 3 - Breakdown of Project Costs/Benefits.






    2007/08 (£000)





    Central Distribution Unit/s




    Local facility re-configuration




    Technical input - facilities related




    Technical input - food related




    Technical input - financial & legal








    ICT infrastructure



    Communications & consultation




    Project management




    CPUPPP/ PFI payments *










    Food and associated costs




    Staff cost savings



    Net Cost/Savings





    * based on 12% annual payment on estimated capital cost of £5.3m for CPU construction