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Mr. HENLOCK. That is right.

Mr. Roor. 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,

Cleveland Ohio, June 3, 1968. Mr. Philip L. Roof, Architect of the Capitol, Washington, D.C.

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 bv 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.

Mr. ANDREWS. He is taking the meat-axe approach which either Mr. Yates or I could take knowing nothing about the restaurant business.

Mr. Roor. He also wrote to Mr. Cowan and he said in that letter: After thorough analysis of my notes and the material which you and Mr. Roof provided for us, we have concluded that the only basis Stouffer's could use for developing a contract for the operation of the House restaurant facilities would be a management fee.

Since Mr. Roof has indicated that the subcommittee would not accept such an arrangement we have declined the invitation to submit a proposal.

RESPONSE OF MACKE CO. The next proposal is from Macke. (Letter from Macke Co. follows:)

MACKE Co.,

Cheverly, Md., June 4, 1968. Mr. J. GEORGE STEWART, Architect of the Capitol, Washington D.C.

DEAR MR. STEWART; Reference is made to your report dated May 23, 1968, concerning the operation of all restaurant facilities for the House of Representatives.

We are very much interested in submitting a proposal for operating these facilities. However, because of the complexity of the operation as well as the brief time allotted for evaluation we are not able to submit a definite financial proposal at this time.

It appears to us from our initial observation that our approach would be to operate on a management fee basis. After a thorough survey of the facilities we will be able to submit our fee proposal along with recommendations for implementing any changes necessary to substantially reduce the current expense incurred by the Government in operating these facilities,

We have attached herewith background information about the Macke Co. which we think will indicate to you our special qualifications for meeting this challenge. Among the more important of these is the fact that we are one of the two highly regarded national food service firms with headquarters just a few minutes away from the Capitol. Additionally, we should also like to mention that our Vice President for Food Services, Mr. Vincent Madden, has had several years' service as manager of the Capitol's dining room and therefore has an excellent background for evaluating your operation.

We appreciate the time afforded to Mr. Ruppert and myself by your Mr. Roof yesterday and we look forward to the opportunity to discuss the matter further. Very truly yours,

S. CHARLES BENNETT, Jr., Vice President for Sales.

PARTIAL LIST OF CAFETERIA ACCOUNTS SERVED BY THE MACKE CO.
The Great Atlantic & Pacific Tea Co., Chicago, Ill.
E. I. du Pont de Nemours & Co., Orange, Tex.
E. I. du Pont de Nemours & Co., Deepwater, N.J.
E. I. du Pont de Nemours & Co., Victoria, Tex.
E. I. du Pont de Nemours & Co., Wilmington, Del.
E. I. du Pont de Nemours & Co., Charleston, W. Va.
E, I. du Pont de Nemours & Co., Gibbstown, N.J.
E. I. du Pont de Nemours & Co., Parkersburg, W. Va.
E. I. du Pont de Nemours & Co., Chattanooga, Tenn.
E. I. du Pont de Nemours & Co., Old Hickory, Tenn.
F. I. du Pont de Nemours & Co., Seaford, Del.
Shell Oil Co., Teer Park, Tex.
Shell Oil Co., Norco, La.
Shell (il Development Co., Houston, Tex.
Shell Chemical Co., Deer Park, Tex.
Aluminum Co., Point Comfort, Tex.
Texas Eastman Co., Division of Eastman Kodak Co., Longview, Tex.

Union Carbide Corp., Texas City, Tex.
Union Carbide Corp., Port Lavaca, Tex.
Union Carbide Corp., South Charleston, W. Va.
Ethyl Corp., Pasadena, Tex.
United Fuel Gas Co., Charleston, W. Va.
Great Atlantic & Pacific Tea Co., Pittsburgh, Pa.
International Nickel Co., Inc., Huntington Alloy, Huntington, W. Va.
Chesapeake & Potomac Telephone Co., of West Virginia, Charleston, W. Va.
Chesapeake & Potomac Telephone Co. of Maryland, Cockeysville, Md.
First National Bank of Kokomo, Kokomo, Ind.
Institute for Defense Analyses, Arlington, Va.
General Electric Co., Bridgeport, Conn.
U.S. Post Office, Philadelphia, Pa.
Evening Star, Washington, D.C.
Sinclair Refining Co., Atlanta, Ga.
Liggett & Myers Tobacco Co., Richmond, Va.
Honeywell, Inc., Petersburg, Fla.
American Tobacco Co., Richmond, Va.

Mr. RooF. Macke is one of the firms that came in late as a result of publicity. I always thought they were primarily a vending company, and I believe you did, too. They tell me they have some large food service establishments.

They say "It appears to us from our initial observation that our approach would be to operate on a management fee basis.”

They say they would like to have the time to make a thorough study of the operation and submit a bid. They attached a list of the primary accounts they now have.

The only account I see on there which is a Federal Government account is a post office facility in Philadelphia.

Mr. ANDREWS. Off the record.
(Discussion held off the record.)

RESPONSE FROM ACTION I, INC. Mr. Roor. The next proposal is from Action I, Inc. (Letter from Action I, Inc., follows:)

ACTION 1, Inc.,

Baltimore, Md., June 3, 1968. Mr. J. GEORGE STEWART, Architect of the Capitol, Washington, D.C.

DEAR MR. STEWART: In response to the subcommittee of the House Committee on Appropriations, having responsibility to recommend funds for operation of the Legislative Branch of the Government, Action 1, Inc., is interested in operating the House Restaurant facilities under the following financial terms:

Subsidy to Action 1, Inc.
Fiscal year ending-
June 30, 1969.-

$250, 000 June 30, 1970.-

150, 000 June 30, 1971.

75, 000 June 30, 1972...

25, 000 June 30, 1973. ---

None Action 1, Inc. has conducted a thorough study of the House Restaurant facilities and is prepared to meet with the subcommittee and outline specifically where the improved efficiencies of operations and the improved food qualities will take place. Most sincerely,

Ralph E. KLOETZLI, President.

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Mr. Roof. This gentleman heard about the invitations and came in and asked to be advised. He says he is interested in operating the House restaurant facilities under the following financial terms:

And then he speaks of subsidies.
Mr. YATES. Subsidies?

Mr. Roof. That is right. First year $250,000, next year $150,000, next year $75,000, next year $25,000, and the next year, none.

Mr. YATES. This is a management fee basis, too, then.
Mr. RooF. No, it appears to be a flat subsidy basis.
He does not say how he would do this.

Mr. ANDREWS. What kind of bond would he provide to guarantee performance? This certainly would be a step in the right direction but only if you knew that he still would be around in 5 years.

RESPONSE OF AUTOMATIC RETAILERS OF AMERICA Mr. Roof. The next proposal is from Automatic Retailers of America.

(Letter from Automatic Retailers of America, Inc. follows:)

AUTOMATIC RETAILERS OF AMERICA, Inc.,

Cockeysville, Md., June 4, 1968. Re proposal for operation of the restaurant facilities, House of Representatives,

Washington, D.C. Mr. J. GEORGE STEWART, Architect of the Capitol, Washington, D.C.

DEAR MR. STEWART: We understand your concern for and appreciate many of the problems of the operation of the House Restaurant facilities. You have, however, allowed but a very brief time for consideration of a very complex program.

That we have outstanding credentials to submit the proposal you requested is evidenced by our successful 41-year history in the food service industry. The 25,000 clients we serve represent all fields of industry, education, and government. Our experience includes operation of facilities of a similar size to your own at the NASA installations at Merritt Island and Huntsville as well as several in private industry. We pioneered the application of the talents of our industry in serving the military by taking over the enlisted men's mess at Moody and Perrin Air Force Bases and proved it could be done.

Our versatility and proven service capabilities attest to the fact that ARA can successfully operate your facilities. However, even our depth of talent and creativity cannot be effectively marshalled to answer the second part of the committee's question in such a short period of time.

In order to answer the question as to whether your restaurant can be run without an operating deficit, we propose that we be given the opportunity to prepare a factual report.

We offer to assume complete operation of your facilities immediately-at no cost to the Government other than for the salaries of our resident managementfor a 90-day period. All of your present personnel will remain on the payroll and no terminations will be made without specific approval.

During the first 30 days we will conduct an intensive on-the-job survey of both your needs and the problems in satisfying them. At the end of that period you will receive a detailed report and our recommendations. Exact costs of each aspect of service will be isolated in our analysis so that the committee may make a quantitative decision on service concepts as well as personnel practices, menus, price and portions.

The committee will have adequate time during the next 60 days to determin what action to take on our recommendations and either negotiate a contract with us or resume operations under the present arrangement.

We would like to emphasize that no responsible firm could possibly submit proposal with a guarantee of cost within the limited time allowed us. The quis tour we had, however, and the opportunity to analyze past operating statements

did signal several problem areas. It appears, for instance, that more careful scheduling of labor alone could result in savings approximating $200,000 annually; that adjustments in menu planning, portion control, purchasing, and basic food service administrative practices would offer further substantial reductions without an essential change in the concept of service.

We speak of suggesting ways of reducing costs with confidence not only in our expertise, but in the private enterprise system-a system that recognizes that no man can serve two masters.

Your very basic problem apparently lies in the conflict between sound management practices and the need to satisfy any whim of Members and staff. It would be career suicide for present management to insist on only sound practices.

The career of your ARA manager would be influenced only by the reports of his superiors. Those reports would indicate how well he meets the objectives of his client, how well he maintains ARA standards of quality and service, and how well he meets established cost pars.

The Government has called on us on several past occasions to contribute our special talents to the solution of problems of national concern. This project is an outstanding challenge-one we will be proud to meet. Sincerely,

Milton E. RAUP, Vice President, Sales.

Mr. RooF. Automatic Retailers of America also would like to testify before the committee if the committee wishes.

They say: We would like to emphasize that no responsible firm could possibly submit a proposal with a guarantee of cost within the limited time allowed us.

They speak of several problem areas. They say: It appears, for instance, that more careful scheduling of labor alone could result in savings of approximating $200,000 annually; that adjustments in menu planning, portion control, purchasing, and basic food service administrative practices would offer further substantial reductions without an essential change in the concept of service.

Mr. Yates. Did you get a chance to talk to this bidder?
Mr. RooF. Yes, I did.
Mr. Yates. Did they amplify what they meant by that?
Mr. Roof. No, sir.
Mr. YATES. What do you make of it?

Mr. Roof. I have not talked with any of these people since the receipt of these bids. In fact I refused to talk to any of them about their proposals because I wanted to present these proposals to your committee first. They also say that

We speak of suggesting ways of reducing costs with confidence not only in our expertise but in the private enterprise system-a system which recognizes that no man can serve two masters.

They say,

Your very basic problem apparently lies in the conflict between sound management practices and the need to satisfy any whim of members and staff. It would be career suicide for present management to insist on only sound management practices.

They continue, “The career of your ARA manager would be influenced only by the reports of his superiors. Those reports would indicate how well he meets the objectives of his client, how well he maintains ARA standards of quality and service, and how well he meets established cost pars.”

RESPONSE FROM OGDEN FOODS, INC. The next proposal is from Ogden Foods. (Letter from Ogden Foods, Inc. follows:)

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