Iowa State University

News Service

News Service:

Annette Hacker, director,
(515) 294-3720

Office: (515) 294-4777

DATE: February 20, 2006

TO: Gregory L. Geoffroy, President

FROM: Thomas L. Hill, Vice President for Student Affairs, and Warren R. Madden, Vice President for Business and Finance


Since the receipt of proposals in late December regarding how to best provide Dining Services at Iowa State University, the ISU Dining Evaluation Committee composed of students, faculty, staff and major users of food services have met a number of times. Four proposals were received from ARAMARK, Chartwells, ISU Dining and Sodexho. Although comprehensive, all of the proposals required clarification and the submission of further information. The committee carefully evaluated each of the proposals. Each organization was given the opportunity to make a presentation which included extensive discussion with the committee. The university also utilized the services of an independent food service consultant, the Duffy Wilkie Group. A comprehensive financial analysis was completed of all four proposals by the consultant and by representatives from the two vice presidents' offices.

Each of the proposals contained positive features that would benefit and improve ISU Dining Services. The RFP requested pro forma information for each bidder and the financial analysis was conducted over a five-year period. Bidders were allowed to propose an option to renew for an additional five-year term if appropriate or necessary to make significant capital investments in improving food service facilities, particularly on the east side of the campus in the Richardson Court area. Because of the existing tax exempt financing of the Department of Residence and ISU Dining outstanding bond obligations of $135 million, a management contract was determined the most effective way to enter into a contractual agreement if outsourcing was to be pursued. All of the proposals were evaluated on a consistent basis.

Financial Analysis

A five-year financial analysis was developed. Because of the different proposals regarding capital improvements, proposed new debt, payment of commissions and administrative charges, and projected utility cost increases, when normalized, the five-year contribution to the university to finance these expenses ranged from $25.6 to $19.6 million prior to incurring any further debt. The ISU Dining proposal appears to offer the best financial contribution.

In addition to the financial return the committee considered quality, performance, service and potential transition issues. After evaluating all of these factors based upon verification of the financial information, the committee recommendation to Vice Presidents Hill and Madden, subject to working out a satisfactory memorandum and operating agreement for your approval, our recommendation is to continue with ISU Dining providing Dining Services at Iowa State University.

There are a number of issues that will be clarified in the administrative agreement with ISU Dining (as would be the case with any of the other firms). These include:

  • The capital improvements proposal must be reviewed to ensure its appropriateness for additional debt financing, approval and location of additional food service facilities.
  • Commission payment schedules. Payments to the Iowa State Center, Memorial Union and Cafes to reflect costs of space and utilities and vending commissions to student organizations and colleges committing space for cafes.
  • Administrative Fees. Review the schedule regarding the payment of administrative fees to cover use of university services.
  • Development of regular financial and programmatic reporting that provides management information to evaluate the business plan, progress and be accountable for implementing the provisions of the proposal that have administrative approval.
  • Clarification of the process for addressing possible future food service needs on or off campus.
  • Process for selection and administrative approval of Director of ISU Dining.

These issues can all be appropriately addressed for your approval. The initial Regents' request that the university review food service operations was primarily based upon financial concerns. The analysis that has been completed and the committee recommendation we are accepting is the best financial proposal, exceeding the others over a five-year period by several million dollars.

The other major reason universities consider making a change is lack of satisfaction with the existing food service. Customer surveys of students, faculty, staff, catering customers and others indicate a high level of satisfaction. The firms submitting proposals approached meal plans and portability for resident students slightly differently, but there is no apparent cost saving to students or increased flexibility that will not be provided by ISU Dining. The firms offer different choices in terms of brands or unique food venues. The evaluation team concluded that when considered in totality none were viewed as significantly more desirable than those proposed by ISU Dining. All of the firms including ISU Dining proposed to retain existing staff and student employees. When projected increased sales are considered staff growth is likely to occur. Existing food costs, a significant cost component, would not be improved. The use of some existing locally or Iowa grown products might be reduced by the outsourced organizations. In addition, utilization of Iowa small and Targeted Small Businesses maybe reduced through outsourcing, as the firms use prime vendor contracts to acquire much of their food.

The committee spent considerable time discussing all of the above, the risks associated with change, the broad student support and satisfaction with the existing dining programs. Since there is no projected financial benefit to change it is recommended ISU Dining continue to provide food service to the ISU community.

Subject to your concurrence we will proceed to work with purchasing to complete the RFP process and develop an operating memorandum of understanding that addresses the above issues for your approval.

Copies of the proposals, addendums, financial analyses and minutes of the committee's discussions are available for review at the Purchasing Department at the Administrative Services Building. We would like to thank the firms that submitted proposals, made excellent presentations and the members of the committee that spent considerable time doing a thorough analysis of the proposals.