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Goodbye GSI, Hello Eurest
New Company To Run Cafeterias

By Rich McManus

On the Front Page...

It's been a long time coming, but this summer, NIH'ers are going to start eating like the justices of the Supreme Court, the nabobs at IBM, Shell Oil and Mobil, and the high-rollers at Chevy Chase Bank. That's because Eurest Dining Services, a component of British multinational corporation Compass PLC, has won a 10-year contract to provide service at six campus cafeterias in Bldgs. 1, 10 (including the B1 facility, the atrium dining room and the lobby-area coffee bar now known as Café Verde), 31, 35 and 45. The cafeterias in Bldgs. 12B and 38A are unaffected by the new contract, and will continue to be operated by the Maryland Business Enterprise Program for the Blind.

Continued...

The change spells the end of almost 50 years of cafeteria service at NIH by Guest Services, Inc., a not-for-profit entity that was established by Congress in the 1930's to provide food service to government agencies. Back in the early 1990's, complaints about GSI's food service began to reach management at NIH.

"We became concerned about employee opinions about our services," said Mike Sullivan, acting director of the Office of Research Services' Division of Space and Facility Management (DSFM), "so we commissioned a survey by HSG/Gould Associates." The October 1996 survey of some 1,700 NIH'ers revealed many shortcomings in GSI's operation. Additionally, analysts found that GSI's yearly earnings — in the range of $5 million — were far below potential, compared with five roughly comparable campus-type settings.

Four months after polling employees, HSG/Gould issued recommendations, and a month later, DSFM recruited a broad spectrum of NIH'ers to serve on an employee advisory committee and a source selection board. The EAC, comprised of some 33 members from 14 institutes and centers, "helped us develop a request for proposals and interview potential contractors," said Sullivan. The SSB was much smaller — only nine members — and they helped evaluate proposals and made recommendations.

"In order to effect the changes in cafeteria service here, we hired Leigh Fisher Associates (a San Francisco group expert in food services contracting and operation) and continued our relationship with HSG/Gould to develop a statement of work that would address the concerns of employees and result in a modern, up-to-date food service operation," Sullivan said.

He noted that in 1992, ORS recognized that "something was amiss" in food service on campus and wanted to make improvements. DSFM renegotiated its license agreement with GSI at that time, directing the company to make $1.2 million in improvements to its six cafeterias here. As an incentive, DSFM allowed GSI to retain up to 9 percent of its gross sales as profit.

Almost half of the $1.2 million went into upgrades at Bldg. 10's B1-level cafeteria, and a quarter went to a major redo of the Bldg. 31 cafeteria; the atrium cafeteria in Bldg. 10 got 20 percent of the total and Bldg. 1's share of the upgrade was 9 percent. In the end, however, it was too little, too late. "It turned out to be a short-term fix," Sullivan notes.

"The new contractor anticipates significant increases in sales due to the introduction of the 'food court' style of service, versus cafeteria style," Sullivan explained. "In June, employees will see some dramatic changes. Plans now are to close the B1 cafeteria in Bldg. 10 and totally renovate that facility." The ACRF cafeteria and coffee bar are expected to handle crowds that used to eat on B1.

Less drastic modifications will occur in Bldgs. 1, 35 and 45, where initial signs of change will include new menus, logos, promotional items and free samples. Like the B1 cafeteria in 10, the Bldg. 31 cafeteria will get a major renovation and will have to close for awhile. "These folks (Eurest) are going to spend a few million dollars on these facilities," assured Sullivan.

For the moment, the cafeterias will remain in their current locations and hours will remain the same as they have been, he said, but "for the long term, the needs of NIH will dictate if they move, reduce or expand.

"Now, the momentum is really picking up steam," said Sullivan, who acknowledges that "it took us a couple of years to get to this point." Foreseen, according to a glossy planning binder complete with color photos, are such amenities as a Sandwich Central station, "Wrap-a-bles" to take advantage of the current taste for wrap-style sandwiches, "Panini Fresca," a fresh grille, bakery, salad station, gourmet coffee bar and carvery with chef on duty. "Eurest just entered into a partnership with Krispy Kreme donuts," Sullivan noted, and company officials confirmed that NIH'ers should expect to see that brand name on campus, as well as such well-known brands as Sbarros pizza and Subway deli sandwiches.

Eurest also will post its menus on a web site, noting prices and special offers so that employees will know ahead of time what to expect, Sullivan said. "In the early days of their operation here, they will learn the habits and desires of our employees and respond accordingly."

In addition to the Supreme Court and Big Oil, Eurest provides food service at NASA's Goddard Space Flight Center in Greenbelt, just recently took over food operations at the National Institute of Environmental Health Sciences in North Carolina, and is ensconced at the Federal Aviation Administration, Montgomery College in Rockville, Fannie Mae, Freddie Mac, Lockheed Martin in Ft. Belvoir, as well as at corporate headquarters for Caterpillar, Prudential and State Farm.

"We have 145 facilities within an hour and a half of Washington, D.C.," said Joan Wedekind, regional vice president for Eurest Dining Services. Her parent company, Compass PLC, has sales of some $3 billion annually in North America, and around $12 billion worldwide. She has already assigned an onsite manager for NIH — Soterios Louvis, who used to manage the Fannie Mae operation — and two other officials who will oversee a staff of about 100 employees. Current GSI cafeteria workers will be offered the chance to interview with Eurest, Sullivan said.

He predicts NIH'ers "will be ecstatic with the change — it will be a complete cultural change. (Eurest) is a top-flight organization." Echoes his assistant Dave Shea, a space management specialist, "They'll be more than happy."

What Eurest stands to gain from the deal — which costs the government nothing and was contracted through the General Services Administration, which is expert in food service contracting (and who will assign contract administration to NIH immediately upon signing of the agreement) — is daily access to 20,000 employees and 5,000 contractors, and a potential earning capacity of at least $10 million a year.

"All we give them are the facilities and the customers," Sullivan said. "They pay for everything else. Inside that cafeteria is theirs."

Sullivan and his staff — experts in leases and contracts — built into the Eurest agreement a number of carrots and sticks, and are grateful for the freedom that the new contract (known as a performance-based service contract) offers compared with the old licensing agreement with GSI, which gave NIH little control over quality.

"We will hold 3 percent of Eurest's sales in escrow, tied to their performance," he explained. "Their obligation is to provide food at prices 10 percent, in aggregate, below the local market value. We established a 'market basket' price, based on the cost of food within a 5-mile radius of NIH. They also have to spend several million dollars in improvements to the facilities, and operate at no cost to NIH. There's a very comprehensive list of performance standards."

Eurest can earn back the money kept in escrow if it meets certain levels of performance. "The customer has to be satisfied," Sullivan stressed. "Eurest is required to do customer surveys through a professional organization, and NIH gets the results. If the performance is below standard, they lose not only the 3 percent, but also another 1 percent."

Sullivan laments that the old agreement with GSI lacked adequate controls. "This, on the other hand, is a contract that includes all those provisions allowing us to control performance."

So much for the stick. The carrot, by contrast, is quite appealing. "The incentive for them is that there's no cap on what they can make, provided the customers are satisfied. The customer will dictate whether they make money or not."

The 10-year contract includes one 5-year option, and requires that, in the fifth year, Eurest spend a minimum of half a million dollars on upgrades.

Meanwhile, Eurest's coffee bar designer has already flown in from Toronto to offer tips on redoing Café Verde, and the company's architectural consultant has been quizzing Clinical Center maintenance workers about the adequacy of Bldg. 10's grease exhaust. Big changes are coming at last to a workforce that had grown accustomed (43 percent of us, according to a survey) to brownbagging it for lunch.

"We want the food to speak for itself," said Eurest's Louvis. "You will be surprised by the variety and quality of our foods."


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