Fiscal year Receipts from Appropriations Expended HOUSE RESTAURANTS-COMPARISON OF RECEIPTS, EXPENDITURES, AND LOSSES FOR THE PERIOD 1940-68 provided by receipts from operation 224,442 10,515 18, 552 2,413 $551 net operating loss; $1,862 capital expenditures. $46,671 net operating loss; $13,700 CSC retirement fund; $1,449 capital expenditure. 43,034 $4,213 net operating loss; $17,698 CSC retirement fund; $3,817 health benefits fund; 140, 190 $74,316 miscellaneous operating loss; $18,727 CSC retirement fund; $4,133 health benefits 111,372 $83,826 miscellaneous operating loss; $20,038 CSC retirement fund; $4,472 health benefits 144,091 $110,996 miscellaneous operating loss; $23,038 CSC retirement fund; $5,071 health benefits 219,257 1712 months. 2 Full year. The estimated deficit for the full fiscal year 1968 is. The estimated deficit for the fiscal year 1969, assuming no changes in menu prices, hours of services, or other possibilities for reducing deficit are adopted.. $354,000 536,000 Note: In the prepared justifications for fiscal year 1969 the amount requested was.. 400,000 Plus: Estimated required for pay increases June 30, 1968, to comply with similar rate increases in wages of 77,932 Required to adjust rates under coordinated Federal wage system developed by the Civil Service Commission in accordance with direction of the President, effective October 1968 58,068 Total estimated deficit, based on assumptions listed above.. 536,000 ADDITIONAL FIRMS EXPRESSING INTEREST Mr. YATES. Mr. Roof, will you proceed and tell us what happened as a result of your explorations into overcoming the deficits? Mr. RooF. First, Mr. Chairman, I would like to state that in addition to the firms I have listed in our letter of June 5, and since we opened the bids, I have received requests from two more firms, large firms, who would like to be considered in the event Mr. YATES. What are their names? Mr. ROOF. One is Savarin, from the Dulles Airport restaurant. I understand they are a large firm. They operate in this general area. The other is Szabo Food Services. They have several accounts throughout town, including the Longworth Cafeterias-not our Longworth, but their Longworth Cafeterias. They say that they are the largest manual food service firm in the country, or one of the largest. Mr. ANDREWs. We should direct the Architect's Office to give them a call and tell them if they want to come in and take a look, they should do so. They should give us their ideas as to what they can do as the others have. We don't want to preclude anyone from making an offer. Mr. YATES. I agree. (Discussion held off the record.) Mr. ROOF. What I thought on this was that after you reviewed these matters I assume you would give us some direction as to where you want to go. That is why I did not encourage these people to do any surveys as the others have, up to th's point, until after we had consulted further. We will call them this afternoon. RÉSUMÉ OF EXPLORATION BY ARCHITECT'S OFFICE Immediately after we had the last meeting with you we began to prepare this statement of May 23, 1968. After that we called all of the firms that you and Mr. Andrews had given us. I believe we contacted all of them except one, which we could not identify. As a result of that, we contacted eight firms. They include the Knott Hotels Corp., Stouffers, Ogden Foods, Government Services, Inc., Canteen Corp., Automatic Retailers of America, Marriott-Hot Shoppes, the Restaurant Association of New York. Then as this was given some publicity, we began to get other inquiries, one from Macke Co. and another called Action 1, Inc. We told these people they could come down at any time and that I would be available to discuss this matter with them. Most of them did come in from May 28 to June 3. We gave them financial statements for the complete year of 1967, which shows a whole year's operation by units and also by periods. We gave them the current statements on a similar basis. We gave them the informational statement you inserted in the record, gave them our pay schedules, an organizational chart, a page proof of the committee hearings which you permitted us to give them, and we answered any questions they had. We advised them that the subcommittee hoped to hold some further hearings this week and we understood the subcommittee would welcome their testimony if they wished to give it. After interviews and discussions with myself, we took all of the representatives up to Mr. Cowan's office and I arranged with him to conduct them on a tour of the facilities. Mr. Cowan or Mr. Damm followed through on that in each case. They answered questions, furnished the menu prices, and any other data requested. We had agreed to receive proposals until the close of business June 4, 1968. When I had received all proposals, I called Mr. Wilson of your staff and asked him to come to the office, sit with me, and open the bids, which he did. We received seven proposals or letters expressing interest. They included Canteen, Stouffer, Macke, Action 1, Automatic Retailers, Ogden, and Marriott Corp. In addition to the proposals submitted in writing I had a call from Mr. Tate, of the Knott Hotel, who said he had gone over all of the material we had given him, gone over the facilities, and had discussed it with his superiors. They were interested in submitting a bid only on a management fee basis but that they could not see any way they could offer the Government an advantage. Their fee would be at such a relatively high rate they could not say whether their operation would result in lowering the cost to the Government. In effect they said they could not reduce the deficit enough to offset their management fee. They said I should make it plain to the subcommittee they would be glad to come down and give you their advice or give the architect their advice at any time. We had a call from Government Services, Inc. They said they had gone over the material and they knew from general knowledge what the operation was, and they would not be interested in running the facilities because of the history of the deficits over a long period of time and the labor problems they felt might jeopardize their other establishments. Restaurant Associates of New York was called; he promised to call me back if his firm was interested, but they did not respond. Mr. Chairman, we have placed before you copies of all the letters and proposals received. I do not know whether you would like to read them yourself or for us to go over them together. Mr. YATES. What do they provide, Mr. Roof? Tell us about each of the companies' proposals and what you think of them. Mr. ANDREWs. Do you want to put them into the record? Mr. YATES. Yes, they should go into the record at this point, all the proposals we have up to date, rather than having us read them over now. RESPONSE OF CANTEEN FOOD & VENDING SERVICE Mr. ANDREWs. Put them in the record one at a time and then your comments following each one. Mr. ROOF. The first one is from Canteen Food & Vending Service. (Communication from Canteen Food & Vending Service follows:) CANTEEN FOOD & VENDING SERVICE, Hyattsville, Md., June 3, 1968. Re House of Representatives restaurant facilities. Mr. J. GEORGE STEWART, Architect of the Capitol, Washington, D.C. DEAR MR. STEWART: First, I wish to thank Mr. Phillip A. Roof, of your staff for the courtesies extended to me, in discussing the operation of the restaurant facilities for the House of Representatives. Canteen Corp., leader in the food-service industry, is most interested in the possibility of operating these facilities. In the short time we have had to examine a sampling of records, and visit the individual locations described in your memorandum of May 23, it would be difficult to attach a value to the efficiencies we could effect in the overall operation. Our greatest concern, is the present employees, many of whom have tendered loyal service over a span of years to the Members of Congress. Removing them from the congressional payroll could result in the loss of retirement benefits for them and result in unfavorable publicity for the operator and Congress. We suggest that to overcome this problem, all of the present employees be retained in their present status. Canteen Corp. would furnish the management personnel to direct the operation. In this manner, we would manage the planning, purchasing, and offer operating expertise, under a fixed-fee-type agreement. It is our sincere belief that, by this method, the transition of the House restaurant facilities would be made more effective. We are convinced that we could substantially reduce your present operating deficit. However, we feel it is necessary to conduct a thorough survey of the facilities by our operating personnel and field engineers before any binding proposals are submitted. It is our considered opinion that by inspecting every facet of the present operation, we would be in position to offer you a proposal that would reflect the greatest mutual benefit, and provide the highest quality of service. We welcome the opportunity to discuss this further with you, and are available at your convenience. We appreciate this opportunity to present the services of Canteen Corp. before the House of Representatives. Sincerely, MELVIN G. ALTSCHUL, General Manager. Mr. YATES. They propose a complete takeover? Mr. Roof. They said, we are most interested in the possibility of operating these facilities. They said, it is difficult to attach a value to the efficiencies which could be effected in an overall operation. What they are proposing is a fixed-management-fee-type contract. This was the same as this firm had with the Senate for a number of years. Mr. YATES. This is the firm which ran the concession in the Senate? Mr. Roof. The same general outfit, yes. Mr. YATES. As I remember it, their operation of the Senate restaurant did not result in the elimination of deficits at all, did it? Mr. Roof. No, sir. Mr. HENLOCK. The deficits continued as previously and they were also paid a management fee. Mr. YATES. The only difference was that you had a management fee in addition? Mr. HENLOCK. That is right. Mr. ROOF. They say they are convinced they can reduce the present operating deficit. Mr. ANDREWS. You cannot go on that type of basis. We would be in the same boat we are in now. Mr. RooF. I made it plain to all these people you were not interested in this type of an operation. RESPONSE OF STOUFFER'S Mr. YATES. What is next? Mr. Roof. The next proposal is from Stouffer's. (Letter from Stouffer's follows:) STOUFFER'S MANAGEMENT FOOD SERVICE DIVISION, Mr. PHILIP L. ROOF, Cleveland Ohio, June 3, 1968. DEAR MR. ROOF: Upon my return to Cleveland we made a thorough analysis of my notes and the material which you furnished us relative to the operation of the restaurant facilities of the House of Representatives. Our conclusion is that the only basis on which Stouffer's should undertake the operation of these facilities would be a management contract calling for a fixed fee or variable fee as a percentage of sales. During our meeting on May 29, you indicated that the subcommittee did not favor a management fee contract; therefore, we have not prepared a proposal for consideration by the subcommittee. For your information, we concluded that we could maintain the present level of service and improve food quality while reducing the costs of operation by at least $200,000 during the first year. A Stouffer's fee of $80,000 would mean a net reduction of $120,000. This cost improvement would be accomplished primarily by a reduction in the present labor force (35 to 40 persons), and secondarily by selected menu price increases and the exercise of good controls to reduce the overall food cost to less than 40 percent. As evidenced by the Statement of Operations, the Congressional Restaurant should be very carefully analyzed since it will show a loss in the neighborhood of $219,000, or 58.5 percent of the overall deficit for this fiscal year. I'm certain there is a way to substantially reduce this deficit for the Congressional Restaurant; however, I would not attempt to provide a definitive program on the basis of the brief inspection tour which was made last Wedsenday. In conclusion, I would like to express my appreciation to the subcommittee for including Stouffer's among those companies given the opportunity to submit proposals. I would also like to thank you for the thorough briefing you provided Mr. Brewer and myself. Yours very truly, HERBERT C. JENNINGS, Director, Food Systems Development. Mr. ROOF. In effect, Stouffer's is the same type proposal, Mr. Chairman. He says they are interested only in a management contract calling for a fixed fee or a variable fee as a percentage of sales. Then he says he thinks he can cut down expenses by some $200,000, and if he subtracted his fee from that, which fee he says would be $80,000, it would still mean a net reduction of $120,000 in the present deficit. He says he would do this by cutting 35 to 40 persons from the payroll, and by selected menu price increases and the exercise of good controls to reduce the food costs. |