Manage rising costs in school contracts
by Zoe Lloyd-Jones – Lead Procurement Consultant at Education Buying
Do you want help to manage rising costs in school contracts? Costs are going up and budgets are struggling to keep up with inflation. The numbers just don’t stack up and for many schools it is difficult to keep your head above water.
Education Buying has put together a toolkit of quick wins and longer-term solutions to help you control costs and make your budgets go further.
Quick wins:
Lets start with the easier, ‘low hanging fruit’.
If you’ve already done most of these things, then read on to the more strategic changes you can make. These come with a warning – they are harder to put in place but will have a greater impact on the bottom line.
We spoke with a range of suppliers across our frameworks and DPS agreement to see what insights they had about their industries and making savings; here’s what we found out:
One of our brilliant suppliers on Education Buying’s School Supplies framework, Lyreco, offered some sound advice on finding savings in a difficult market:
Lyreco
- REDUCE THE WEIGHT OF YOUR PAPER – Switching paper from 80 gram to 70/75 gram could help you cut costs by 2-4%. Many suppliers will happily work with you to find the right lightweight alternatives which won’t clog up your printers or have discoloured paper. If you have a heavy printing footprint, these seemingly small changes can be a real cost-saving gamechanger!
- REDUCE WASTE – If you reduce the weight of your paper, you also reduce the weight of your paper waste. Cutting down from 80 grams to 70 grams can save up to 13% on paper waste costs.
- GO DIGITAL on print (and don’t actually print at all!) – The best way save on paper is to not use it so switch to digital for newsletters or updates to parents, using apps or email as an alternative.
- GET SMART IN WASTE MANAGEMENT – Recycled waste is often an overlooked area that can be costly if not managed effectively. Land fill costs are also on the rise. Some companies offer free recycling schemes for various products, like batteries, cardboard, toner ink and cartridges. Good for the budget and good for the environment.
Another one of Education Buying’s suppliers (this time on the Cleaning DPS), Ridge Crest suggest the following cost-saving tips to optimise your cleaning contract:
Ridge Crest
- FOCUS ON PRODUCTIVITY – 85% of the cost of a cleaning contract is in wages. We don’t want to cut wages (as this will leave you shorthanded in a competitive employment market), so let’s focus on productivity of the workers. Ideal productivity levels in a cleaning are around 265m2 – 300m2 per employee per cleaning hour. This is the key focus to ensure good value: ensure you are conducting productivity analysis so you understand how effective and efficient your contract / in-house provision actually is.
- COMPETITIVITY PACKAGES TO ATTRACT AND RETAIN STAFF – Based on those productivity numbers above, we need to ensure we are only paying for time and weeks worked, while attracting and retaining staff into post. Consider a review of hours per shift and the weeks per year that the staff are contracted for. Optimal levels are 44 weeks at 4-6 hours a day. These are also the most advantageous contract offerings to go for when looking to hire new staff.
- GET SUPER-SUPERVISORS IN PLACE – Supervisors are also a key factor in making sure productivity is maintained at a high level: top quality staff in these posts will be the key to success for your school.
Strategic measures for reducing costs in catering contracts
While quick tips are useful short-term, long-term savings for your most expensive contracts like catering can be difficult to come by in this current economic situation. However, there are strategic ways you can prevent added costs in the future. So, how do you do that?
Meal uptake
After your menu is designed and set, then your next step is to focus on increasing meal uptake. While there are external factors involved that make that easier said than done, it will benefit your pupils, and can provide a useful source of income. All this will also benefit your supplier as they want to make sure they are supplying good food to your school.
Some ways you can increase your meal uptake are:
- Marketing efforts like handing out leaflets advertising half-price meals for the first week of term or, tasters to parents/meet the caterer events at parents evening.
- Involve parents more as reports suggest that meal uptake is partly tied to parents having concerns over the quality of the service.
- Moving to a cashless/pre-paid system can help ensure school meals are bought, while also helping with forecasting.
- Reduce queues with more than one serving time or make ‘cold foods’ purchasable in separate areas from the normal meal queue.
Menu design
The menu design is key to gaining efficiencies:
- Work with your suppliers on this as they are experts in what they provide.
- Focus on reducing food wastage with the meals you plan to include, leftover meals can be turned into different meals for the next day.
- Focus on seasonal ingredients as they will have be more cost effective and if that’s not applicable, aim for long-standing meals for which you can bulk purchase ingredients.
- You can also work with your supplier to include costed recipes into your contract to try to achieve savings. If you have aggregated your contract with neighbouring schools or within your MAT, we also recommend you buy in bulk as it will work out cheaper for all the schools involved.
Meal uptake
After your menu is designed and set, then your next step is to focus on increasing meal uptake. While there are external factors involved that make that easier said than done, it will benefit your pupils, and can provide a useful source of income. All this will also benefit your supplier as they want to make sure they are supplying good food to your school.
Some ways in which you can increase your meal uptake are:
- Marketing efforts like handing out leaflets advertising half-price meals for the first week of term or, tasters to parents/meet the caterer events at parents evening.
- Involve parents more as reports suggest that meal uptake is partly tied to parents having concerns over the quality of the service.
- Moving to a cashless/pre-paid system can help ensure school meals are bought, while also helping with forecasting.
- Reduce queues with more than one serving time or make ‘cold foods’ purchasable in separate areas from the normal meal queue.
Remember that portion sizes need to be protected – this is not an area to cut back on!
If you are about to go out to tender for a new catering contract, here are a few points to consider.
Power in numbers – Aggregation
Aggregation is when multiple smaller schools join together to be part of a larger buying entity, typically you will be put together with schools in your local area. While effective for multiple small schools, due to the scalability of aggregation, this is particularly effective for MATs with their increased size. If you are interested in this then please contact us as we can help put you in contact with likeminded schools.
Smart contracting – Know your options
Before going out to market, it’s important to know which contract type is best for you, as it has a big impact on how savings will be achieved in the first place. The different types of contracts include:
- Cost plus – This covers the actual costs of delivering the service, plus a management fee or ‘profit’ layer on top.
- Performance guarantee – Similar to cost plus, but the management fee is linked to performance (e.g. level of overheads or gross profit)
- Fixed, single annual cost – A single known and fixed fee for the service. While this provides certainty it does not always encourage cost savings from the supplier, and can reduce quality if the supplier is not making money.
It’s important to consider the length of contract. The longer the contract, the more savings can be made and the more attractive the contract will be for suppliers.
Energy Efficiency
Are there still savings to be made on your energy contract?
With so many external factors impacting energy costs, there is little certainty around pricing during the coming months and years.
However, we have a few handy tips to reduce usage rates, which will help to control costs within your current contracted rate.
1. Educate staff and children to turn off water and energy-using appliances when not in use – It may seem the most obvious thing to do but it has proven to work! Many schools we work with have groups of ‘energy-champions’ that check at the end of each day for equipment or lights that have been left on, switch them off and inform the staff responsible.
If you decide to run this campaign at school, be sure to recognise and reward success. It has been proven that monitoring usage makes a positive difference on usage rates; reporting on and celebrating achievements helps to maintain enthusiasm. Start with the basics, such as switching off lights and electrical equipment when not in use.
2. Use the building systems properly – Make sure you are using existing heating or lighting controls effectively to reduce energy wastage, save money and reduce emissions. For example, regular boiler services and correct operation with the use of thermostats in strategically placed locations will help maintain maximum efficiency and could reduce heating costs.
3.Use energy efficient lighting – Lighting accounts for around half of the electricity used in a typical school. By switching from fluorescent to LED you will be able reduce electric energy consumption associated with tube lighting. You could reduce your consumption by installing lighting controls (which are often very economical), using occupancy lighting sensors in areas that are infrequently used and replacing failed lamps with more energy efficient ones that last longer.
4.Optimise heating – Make sure heating, ventilation and lighting controls are working properly to provide a comfortable environment for teaching and learning while matching actual working times. Operating the heating systems for an hour less each day will save a good amount. Recommended temperatures for classrooms and corridors/circulation spaces are 18°C and 15°C respectively.
5.Use your meters for energy monitoring – Monitoring meter readings is a low or no cost measure that provides the capability to monitor energy end uses. Many schools have recently had smart meters installed on their gas, electric and water supplies. These provide information about how much energy is used and when. This will help you to understand your energy use and how it can be reduced.
If you have a smart meter, make it work for you! You can compare your school performance to ESFA benchmarks across the main energy end users of lighting, small power, heating gas, kitchen gas.
6. Manage (ICT) equipment – ICT equipment uses electricity directly and indirectly; in the form of additional cooling and lighting. The electricity used by ICT can be significantly reduced by selecting energy efficient equipment and enabling power management features. Rooms with interactive white boards should be set up to allow users to quickly and conveniently manage blinds and lighting. Energy use can be reduced by using free ventilative cooling to stop it overheating on those warmer days.
7.Improve insulation – Use draught strips on windows and doors. This is one of the most effective ways to save money and improve comfort! Depending on the time of year, the gap between a door or window and its frame can vary by 3mm. Using draught strips can solve this problem.
Insulate hot water pipes, keep runs of pipe work short, and lag pipes properly. Lagging pipes saves energy and reduces the risk of pipes freezing or breaking in the cold months. Insulate rooves and eaves to keep the warm air in. By upgrading your insulation you will realise a hefty reduction in energy waste related to heating (or cooling) your building.
8.Consider renewable energy – Small-scale renewable energy systems are pollution-free and will help to reduce energy bills. They can also generate interest in energy efficiency amongst pupils and provide a valuable teaching resource.
Renewable energy systems that can be appropriate for schools include: wind turbines, biomass, solar heat/power and, heat pumps. Although this can seem like a big investment to begin with, it’s important to think of the long-term savings that will come from it.
Get Strategic on Energy
Procuring energy for a school is much more complex than buying energy for a home. Public sector organisations have to follow PCR15, and many establishments don’t have the time or the experience of buying energy.
Many schools we have visited haven’t reviewed their energy contracts for years; most stay stuck in a static ‘one size fits all’ contract given to them by their incumbent supplier.
The prospect of leaving your local authority’s existing energy agreement can be a daunting change. But if its planned properly and well managed, it could lead to real savings, improved reporting and visibility on costs.
So, what should you consider when procuring an energy contract?
1. Timing is everything. Know your contract end date, notice period and work backwards from that. Penalties can be high if you try to get out of a contract outside of the pre-agreed window. Also, out of contract rates can be three or four times higher than standard rates and transfers between suppliers can take up to 28 days. Therefore, ensure you give your existing supplier and new supplier enough notice for a smooth transition.
2. When it comes to procuring an alternative contract, your first key consideration will be whether to go with a fixed or flexible contract. The process of deciding will involve having to address a whole series of different questions, but in its simplest form, we’d suggest seeing this choice as similar to a mortgage arrangement – fixed for a specific period, or variable in a way that will follow broader market trends.
The important difference is that prices for energy are much more volatile than the Bank of England’s base rate. The fixed price is based on the market on that specific day. Whilst it is true that energy prices are essentially valid one day at a time, this certainly should not force you into a particular decision.
The risks of buying in a volatile energy market can be minimised through following a flexible procurement strategy by joining an energy basket through aggregation.
An energy basket pools the requirements of many organisations, allowing economies of scale to be achieved, while offering greater flexibility over a longer term contract. The basket owner (or buying organisation) aggregates the volume of energy that all organisations in the basket will use, and then buys chunks from the market in advance of supply. Individual customers then receive the average price of those chunks of energy for 12 months.
When comparing energy cost, be sure to compare all pricing elements, and not just standing charges or unit charges. Not all suppliers include all price aspects in their quotes and may add the on-costs onto the bills once you have signed up. Make sure you are comparing like-for-like when looking at alternative suppliers.
Throughout an energy contract you may need support and advice on energy issues. Support can include:
Bill Validation – know what you’re looking at and make time to review them. It’s surprising how many bills from suppliers are incorrect.
Visibility of costs – It’s important to know what your standing charge rate and your annual consumption are so you can check this is right on your bill.
Contract and supplier management – Handing over the management of your energy contract to procurement professionals ensures you are on top of any billing issues immediately.
Know your contract
Here are some key tips to manage rising costs in school contracts… If you do not know your contract’s capabilities, how are you supposed to make sure it is still working in your favour?
By knowing your contract you will have a keen understanding of:
- The basics – Do you have early exit options? What’s your notice period and deadline? And how much would the contract increase by if you were to roll it over? These are crucial for your big spend areas like catering.
- The scope of the contract – Can you increase or decrease the scope without incurring a penalty charge? Do you know your KPIs?
- The reporting – Ensure you are regularly benchmarking the contract on both cost and productivity, especially if you are with a supplier long-term. Is it worth the investment to get a spend analysis report to ensure you do not have any duplicate spends, typically you can end up with discounts if you do, so we recommend it.
- The back-office – Anything that saves time, saves money, so look to consolidate your invoicing for example and ask your team and your suppliers for innovative ideas on what they can do to help reduce costs. Be an informed customer and you can help suppliers reduce their cost to serve too, it’s a win-win!
Act now
Controlling escalating costs is an uphill battle. There are a few single measures you can put in place quickly which will help reduce usage and consequently contract costs. There are a number of more strategic measures we can review across the big ticket contract areas which will deliver greater savings but are harder to implement.
To conclude, with escalating costs continuing to stretch budgets, it’s key to strategically think about what exactly your school or MAT can do in both the short- and long-term. Utilise quick wins when you can, but make sure you are thinking about your top spend areas for ways to save through energy saving methods or menu optimisation, but also avoid further costs in the future.
It’s a tough period for schools and MATs but by working together, we can find ways to push through to a brighter future.
Our team of procurement experts at Education Buying can help you save you time, money, and ensure compliance on a range of contract areas. If you would like to see the many Frameworks and DPS’s that Education Buying offer, click the link here to find out more.
The Education Buying range of Frameworks and DPSs are designed for schools, by schools.
