Performance Based Studies Research Group Quality Control and Risk Minimization

Afternoon Agenda Introduction to the Best Value Process Quality Control Performance Measurement Current Risk Reporting

Overview Best Value concepts generate an efficient process in any industry that: –Forces vendors/individuals to identify: Who they are What makes them different (based on value) –Is proactive vs reactive –Is Leadership-based, not Management Based Food services are no different –Management/control minimized (including ASU) –Vendor must have measurable vision –Value, risk minimization, preplanning, quality control, performance PBSRG partnered with ASU in the selection of a $42 Million per year (7- 10 year) food services selection. –PBSRG Lead Project Manager

ASU’s Strategic Plan/Vision Selection based upon measurable, provable, and enforceable differentiation of performance and value –Risk –Value –Finances –Past Performance Minimize risk through preplanning and quality control Minimize inefficiencies through a high performing vendor Measure and track performance for continuous improvement Have the best food services program in the country – a claim supported by performance data

Best Value System PHASE 3: MANAGEMENT BY RISK MINIMIZATION PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL

Best Value Model – Food Services Current Conditions: (Requirements, Constraints, & Expectations) Risk / Solutions Value Added Key Personnel Interview Identification of Best Value (PPI, RAVA, Interview, $$$) Preplanning / QC Program Details Weekly Report (Risk Management) Past Performance Information (Key Players, Firm, Financial)

Price Based Selection vs Best Value Selection Price Based (Management) Qualifications Program Interview Financial projections No linkage Best Value (Leadership) Past Performance Risk Assessment (don’t control) / Value Added Interview Financials (simplified and proven) Linkage into PP/QC and Risk Minimization

Keys to Selection Non-Technical –Risk focus –Minimize decision making –Data and binding information –No “dining program” –No marketing Change –Release of details and control 40 page RFP (compared to 800 page for similar service) Intent not requirements –Differentiation – less is more –Process Logic replaces experience

RFP Selection Phase Pass/Fail Criteria –Executed Mandatory Proposal Certification –Willingness to execute –Pro Forma Financial Projections Scored Criteria –Risk Assessment and Value Added Plan –Management Interview –Past Performance Information –Financial Compensation

Scored Criteria – Risk Assessment and Value Added Plan The Risk Assessment Value Added Plan (RAVA Plan) has three sections: –Risk Assessment –Value Added Differentiation –Transition Milestone Plan

Risk Assessment The Risk Assessment section is used to identify high performing vendors that can: –Identify and minimize risk before the service has started –Deliver plan to minimize risk during the life of the service. The RA Plan should clearly address the following items: –List and prioritize major risk items (areas that may cause the service not to meet the expectations of ASU). –Each vendor should focus on risks it does not control and –Explain how the vendor will minimize the risk.

Value Added Differentiation Answer the questions: “What value do I bring that differentiates me from my competitors?” The Value Added Differentiation section of the RAVA is to allow a vendor to: –Show how it will add value (that its competitors cannot) –The impact of that value in simple, provable terms –How the value added will be measured – must have an impact on dollars, time, and/or satisfaction of the University Marketing material is worthless and will negatively impact scores There is no “program description” in this RFP – Value Added is where vendors provide “great ideas”

Transition Milestone Schedule Identify key step and milestone dates for transition to the new contract and best value Focus on key events and maintain simplicity RAVA = 5 pages + 1 page for schedule

Scored Criteria: Past Performance Information Past/Current Client Surveys PPI was collected on all vendors and their critical team components. Once the PPI was collected, it was stored in a database. Past performance will be used in conjunction with current performance to maintain best value for the life of the contract Attachment: Guide to Preparing a Reference List and Sending Out Surveys Reference list template (MS Excel)

Past Performance Information Past Performance Information was collected on all critical team components, which includes: –Food Services Firm (firm) –On-site General Manager or Equivalent (individual) –General Manager’s Immediate Supervisor (individual) –Regional Vice President (individual) –Executive Chef (individual) –Catering Director (individual)

Scored Criteria: Interview The ASU interviewed the key personnel. This included: –On-site General Manager –General Manager’s Immediate Supervisor –Regional Vice President –Director of Catering –Executive Chef All individuals were interviewed separately. No substitutions will be allowed after proposals are submitted unless it is for the benefit of the client (no bait and switch). What is said in the interview become part of the final contract

Past Performance Information – Financial and Other Data University also required past financial performance: –To capture past financial performance –Compare vendors on capability to increase/grow an account

Past Financial Data (vs Time) Total return (in dollars $) Total return (as a percentage % of sales) Retail revenue (in dollars $) Catering revenue (in dollars $) Voluntary meal plan revenue (in dollars) Total sales per labor hour Total enrolled student population Total number of meals per enrolled student Total number of retail meals per enrolled student Meal plan average missed meal percentage Customer satisfaction (for students) Average Delta Slope

Scored Criteria – Financial Proposal Financial Proposal Worksheet –What is proposed will become part of the winning vendor’s final contract List of Overhead or Indirect Costs such as G&A, Purchasing, etc. List of costs that are proposed to be considered as Direct Operating Costs Pro Formas provided for each POS…(Pass/Fail – this was not scored)

Financial Proposal Worksheet Commissions offered to the University –Meal plan sales –Retail sales –Subcontractor sales –Catering sales –Summer Conference Dining sales Capital Investment Plan Equipment Replacement Reserve What is given here will become part of the final contract

Financial Proposal Worksheet

Best Value System PHASE 3: MANAGEMENT BY RISK MINIMIZATION PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL

Best Value Model – Food Services Current Conditions: (Requirements, Constraints, & Expectations) Risk / Solutions Value Added Key Personnel Interview Identification of Best Value (PPI, RAVA, Interview, $$$) Preplanning / QC Program Details Weekly Report (Risk Management) Past Performance Information (Key Players, Firm, Financial)

Best Value Measurement Value Transfer risk and control to expert Preplan, minimize risk that you do not control, risk management Risk management is always a needed activity (Quality Control) Supply chain (us mentality) No leverage

What does it mean? Proactive and Accountable –Vendor has control –Focus on risk in the seems –Risk – Plans to minimize risk – impact – customer satisfaction –Performance measurement –Projected vs. Actual Win-Win –Aramark’s success is just as important as ASU’s success –Goal alignment “No contract” – “Vendor writes their own” –Vendor has control –Contract is a guide –If we have to go to the contract then everyone has already lost –Should never have to go the contract

Risk Overview Risk = Uncertainty/Perceived Variability Only exist when there is a lack of information or knowledge A realized risk causes impact ($, time, and/or satisfaction) Not a “dirty” word - just part of the Event Risk Minimization is synonymous with Efficiency

Risk and Leadership Effective Leadership or Best Value Structure uses… –Vision –Measurement –Alignment –Accountability …To create as efficient an environment that is possible (best value) An efficient environment is one where risk has been minimized to the greatest degree possible Leadership seeks to create Efficient Environments through Risk Minimization Best Value looks to the expert (vendor) to be the leader

Risk and Leadership: Vision Initial conditions Final conditions Time Laws A Highly Effective Leader sees “End to Beginning” Every Leader has “Vision”

Risk and Leadership: Vision Initial conditions Final conditions Time Laws But does it by only looking from the Beginning Risk Uses Information & Logic to Increase Vision

Risk and Leadership: Measurement Initial conditions Final conditions Time Laws Risk Uses Minimal Measurement & Information to Differentiate, Select, and/or Align Resources to Match the Vision Must be minimized from the beginning… Measurement & Alignment

Risk and Leadership: Focus Initial conditions Final conditions Time Laws Risk A Leader Focuses on Risk they Don’t Control The “don’t control” focus requires an “us” mentality – supply chain No Control …so alignment is required for & within each domain A leader aligns the pieces/domains of the “us” group

Risk and Leadership: Accountability Initial conditions Final conditions Time Laws Structure w/ Accountability Accountability required to maintain performance Leader creates and implements a system of accountability Maximum Accountability = –Performance measurements –A “Don’t control” risk focus –Minimization of information flow Efficiency requires minimal information, those most a risk measure, and constant alignment based on information

Pre-Planning/Quality Control Period Quality Control Plan Quality Assurance Checklist PPQC Document The objectives of the pre-planning/QC period are to: –Provide and finalize a detailed food services program –Preplan the service / detailed analysis –Identify and minimize risk including client issues before the service begins –Identify all risks that cannot be controlled by the vendor and develop plans to minimize those risks (includes unforeseen risks) –Develop a list of client action items and responsibilities –Develop a detailed list of performance metrics and benchmarks considering financial performance, quality, and customer satisfaction –Develop a Risk Minimization and Performance Measurement Program to be used during the life of the service to document risk and performance –Finalize transition schedule

Vendor Performs Quality Control Quality Control – became the contract –Focus on risk the vendor cannot control and their minimization –Seven (7) Primary Risks (26 sub/general risks) Bad Debt Meal Plan Counts Asbestos Abatement Construction Delays Loss of Sites Client change in start date Utility capacity –Risk minimization steps –Identification of when the risk reverts to client with level of impact

Example: Bad Debt Collection

Result ASU not certain about debt collection Contract formed with two options (if and if not) Once impact shown, decision made to eliminate risk and have ASU collect debt Risk identified – risk eliminated

Example: Meal Plan Counts

Helping Client Efficiency

Complete Transition Schedule

Best Value Model – Food Services Current Conditions: (Requirements, Constraints, & Expectations) Risk / Solutions Value Added Key Personnel Interview Identification of Best Value (PPI, RAVA, Interview, $$$) Preplanning / QC Program Details Weekly Report (Risk Management) Past Performance Information (Key Players, Firm, Financial)

Performance Metrics Financial –Sales –Commissions –$/Labor-hour Performance –Risks –Student Satisfaction –Customer Satisfaction –Missed Meal Factor –Student Worker # –Sustainability (tonnage) Expansion –Catering $ –Retail $ –Voluntary $

Changes this has Brought Risk and Reality –Risk and Performance defined and measured –Alignment of Expectations Accountability –Vendor QC – Client QA –Measurement of risk Vendor is the lead – change in culture –Client defaults to vendor

Initial Results: Information Environment Projected % MetricFY06-07Sept 07(65% of 12mn) Difference Aramark Retail Revenue (in $M's) $ $ 2.30 $ $ % $ Catering Revenue (in $M's) $ 1.80 $ 0.15 $ 1.19 $ (0.61) (0.34)% $ 2.52 All Other (in $M's) $ 4.10 $ 2.00 $ $ % $ Total Revenue (in $M's) $ $ 4.45 $ $ % $ Total Commissions to ASU (in $M's) $ 1.94 $ 0.34 $ 2.63 $ % $ 2.69 Total sales per labor hour $ $ $ % Total number of transactions: Retail & Res (in #M's) % Total Revenue per transaction $ 4.08 $ 6.17 $ 5.73 $ % Voluntary Meal Plan Participants 2,651 2,241 Mandatory Meal Plan Participants 6,228 6,531 Total Participants 8, ,772

Weekly Risk Report Identifies Risk –Why it was a problem –How it will be minimized/plan to mitigate –Who is responsible –Explanation of Impact Planned date of resolution Tracks actual date of resolution Key contacts (personnel involved) Impact to Revenue Impact to Schedule/Delivery of Services Source of the Risk (ASU/Aramark/Unforeseen) Client Satisfaction Rating

Example Issue: MU Fire

Pictures Removed for Posting

Events cont. Tuesday –Kitchen Set Up and serving food Tuesday –Kitchen shut down by ASU permitting Wed Tues (six days) no permit issued (then Thanksgiving) Wed –Kitchen is up and running

Summary Aramark had very fast response and resolution Did not cease operation and look for direction (no contract directives) Utilized their Quality Control plan and proactively mitigated the risk, which was planned for before their service began Weekly report creates the documentation of how the risk is resolved –Shows value added and vendor performance

Workshop An efficient environment must be simple Simple means everyone knows: –What their responsibilities are –How they fit into the overall structure –What risks they bring to the overall structure Workshop Activity –Form into groups –Draw Aramark’s Organizational Chart at ASU Person/Area

Workshop Activity Next –Compare your group’s org chart to everyone else's [Come to an agreed upon org chart (if all don’t agree)] Workshop Activity –Take the org chart (correct or redraw) –Answer: Where does the money come from? –Break out areas by percentage of revenue Where do the biggest risks currently come from? –or Who/What is the biggest risk?

Workshop Activity –Working individually or together –Answer What are your risks/issues/problems (now/future)? –What risks or inefficiencies do you see: »Caused by Aramark? »Caused by ASU? How do you minimize these risks? How does the minimization affect everyone else?

Moving Forward Everyone understanding the supply chain Everyone understanding Aramark has control –Measurement holds accountability –Accountability drives performance Need a structure where: –Performance is measured and used –Risk is identified allowing mitigation –Data is available to minimize decisions

Future More education System of risk identification and performance measurement Working with you to set and test a structure Move from ASU to all Aramark campuses Master of Science program in this area

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