One of the two international corporations vying to run Rock Hill schools’ lunch and breakfast programs paid $20 million in 2010 to settle a lawsuit alleging that the company illegally overcharged New York school districts for food operations.
The other company had a contract terminated by a Massachusetts school system earlier this month after several hundred parents complained about the food students were served.
Food service giants Sodexo and Chartwells were the only companies to respond to Rock Hill schools’ announcement that the district wants to privatize food operations.
The firms run food services for hundreds of school systems across the country and have amassed complex records that include satisfied customers and critics.
A 2010 investigation by former New York Attorney General Andrew Cuomo found that Sodexo “promised to provide goods at cost but failed to acknowledge rebates from suppliers, resulting in illegal overcharges” to 21 school districts and the state’s university system.
“This company cut sweetheart deals with suppliers and then denied taxpayer-supported schools the benefits,” Cuomo said at the time.
In an e-mail response to The Herald, Sodexo spokesman Gregory Yost pointed to a statement issued after the settlement, which said Sodexo worked with the attorney general on the investigation and conducted its own investigation.
“Sodexo has now taken measures to ensure that all schools that participate in school lunch programs are fully compliant with the applicable regulations,” the statement said. “Sodexo remains committed to ethical business practices and maintaining strong relationships with its clients.”
With more than six thousand clients, the company keeps a retention rate of more than 95 percent, the statement said.
The Wellesley Public School district in Massachusetts terminated its food service contract with Chartwells earlier this month, less than a year after hiring the firm, according to news reports.
The decision followed a series of health code violations in the fall and a parent survey about lunch quality that drew nearly 700 responses, most of which panned the food, the Boston Globe reported.
A Chartwells representative at the Wellesley school board meeting in which the contract was ended reportedly defended the company and said food quality complaints were unfounded.
In an email to The Herald, a Chartwells spokesperson declined to respond to specific questions but wrote: “Chartwells successfully serves approximately 2.7 million students in over 6,000 elementary, middle and high schools across the country.”
It’s not clear whether Rock Hill school officials or the committee evaluating the firms’ proposals discussed those issues.
Rock Hill school officials couldn’t be reached Friday.
Costs and benefits
Outsourcing food services has proved an attractive option for schools, particularly in recent years as budgets were cut in the recession. Private companies pledge to save money on labor and food. Educators see it as a chance to cut back on ancillary services and focus on the “core mission” of teaching.
Rock Hill school officials have been exploring the idea for about a year. They have said they hope an outside company specializing in food service can run the district’s operation more efficiently.
Some districts that outsource are satisfied.
“It certainly has been an excellent relationship (with Chartwells),” said Jim Skelly, spokesman for Farmington Area Public Schools in Minnesota. “It does feel like they understand the mission of the school district.”
But the change from a public system can come at a cost to employees and nutrition, said Roland Zullo, a University of Michigan researcher who studies outsourcing by school districts across his state.
When a private contractor takes over, food service workers can become employees of the firm.
“They don’t always cut wages, but they almost always slash benefits,” Zullo said.
In Michigan, he said, private food-service firms often served pre-packaged, pre-prepared food and sold unhealthy snacks like donuts, chips, candy and soda in vending machines and at “a la carte” stations. In 2008 Zullo found a trend he called “disturbing.” Even after researchers controlled for factors like poverty, outsourcing was tied to lower test scores.
“Inviting these contractors in has negative effects on young children’s ability to sit still and concentrate,” he said.
There are successful examples of privatized school food operations, Zullo said. “But they tend to be in areas where the districts are wealthy and cost wasn’t a driving factor.”
When cost is a key driver, he said, “what emerges is a fast food model.”
Sodexo spokesman Yost said the company “works with its clients to support student achievement.”
“Our programs educate students about the importance of good nutrition and the benefits of making healthy choices in life, and we also work continuously to create healthier school meals.
“We are a big part of the solution when it comes to tackling childhood obesity because we have the size and scope to make a significant impact. One small change means that 2 million school meals each day are healthier for kids nationwide.”
Food service giants
The food service industry is dominated by three companies – France-based Sodexo, which has its North American headquarters in Gaithersburg, Md.; Philadephia-based Aramark; and Chartwells, a division of the Compass Group in Britain.
They run operations for thousands of agencies, including public schools and universities.
Fourteen of South Carolina’s 83 school districts have privatized food services. Seven hired Chartwells. Six, including York schools, work with Sodexo. Clover schools hired Aramark.
Beaufort County schools have had a contract with Sodexo for more than 10 years.
“Sodexo has been a true partner with our district,” said Phyllis White, chief operational services officer. “They have worked with us as if they are part of our district.”
With Sodexo’s help, all 29 of Beaufort’s schools won a HealthierUS Schools award from the Department of Agriculture for voluntarily exceeding health and nutrition requirements.
No campus serves fried food, and Sodexo is partnering with area farmers to get local, fresh fruits and vegetables in the lunch line, White said.
The district pays Sodexo $2.79 per meal, according to the contract, a copy of which was obtained by The Herald. The firm pays the district $119,980 a year in “indirect costs” and must guarantee an additional annual payment of $166,083. That’s on top of Sodexo’s profit.
When the company failed to reach the district’s guaranteed payment one year, White said, “they didn’t hesitate to pay us what they owed us.”
Last school year, the district spent $8.84 million on food service, $384,000 more than the prior year.
The York school district has worked with Sodexo for at least 20 years, Assistant Superintendent Matt Brown said.
“We’ve had very good success with them,” he said.
The firm operates as a consultant, allowing the district to leverage its buying power, online tools, marketing expertise and meal planning. But all food service employees work for the school district.
Officials felt it was best to keep workers in the state retirement system, so they didn’t risk losing benefits they had earned.
“We want to make sure to take care of our people,” Brown said.
Chartwells gets rave reviews in Farmington Area schools, a suburban Minneapolis district of 6,500 students and one high school, spokesman Jim Skelly said.
“The quality of food and (student) participation is high,” he said.
A district chef crafts menus, which sometimes feature produce from local farms. In March, students sample new meals then vote on what makes the cut. The company brought in rice vendors and tomato growers to show students where food comes from, then gave students samples to take home, Skelly said.
No employees were laid off when Farmington outsourced, and Skelly said the district hasn’t received complaints about wages.
“It’s been generally seen as a success,” he said.
In 2005, Sodexo, then called Sodexho, agreed to pay $80 million to settle a lawsuit brought by thousands of black employees who said they were routinely denied promotions and segregated within the company.
In response to The Herald, Yost said, “Sodexo is celebrating a 10-year diversity journey that has transformed our corporate culture and reflects our company commitment to progress.”
He pointed to awards the company has won for being “a best place to work for minorities, multicultural women, veterans, and people with disabilities.”
Chartwells’ performance was recently criticized by Washington, D.C., school officials, who warned the company that it could lose its contract if things don’t improve, The Washington Post reported.
School leaders complained to the company about spoiled food, late deliveries and missing items. The company responded that no student had received spoiled food or went without meals.
Rock Hill school officials have declined to release information about what the firms propose to do in the district.
The decision has been largely in the hands of a seven-member committee evaluating the companies’ proposals behind closed doors.
School board member Jane Sharp criticized district leaders for not being more open about the process and for not including more parent and community voices on the committee.
The committee includes a principal from an elementary, middle and high school; the district’s food service director; the district finance director; a parent who works in the district office and a community representative who worked in the district until last year.
Sodexo and Chartwells declined to answer questions from The Herald about whether they propose to cut employee benefits, partner with local farmers or serve fried foods and processed meats.
District officials have said the winning vendor must keep current food service employees on the job for five years.
The district was scheduled to send evaluation materials and a draft contract to the state for review on Friday. A contract could be awarded as early as June 1.