Government gives $85 million school lunch contract to overseas company, leaving local suppliers out of business

Deputy Education Minister David Seymour announced in May that he would reform the free school lunch program known as Ka Ora Ka Ako, saying it was too expensive and a “wasteful expenditure”.

The new lunch program sets a strict budget of $3 per meal, which is about $5 cheaper than the current model.

The $85 million annual contract was won by School Lunch Collective, led by global catering company Compass Group.

At the time of the new menu announcement, Seymour said the government was “leveraging private sector expertise” by awarding contracts to firms such as Compass Group NZ, Libelle and Gilmours.

Kelly said her company had made “significant improvements” to the business as it thought existing contracts would run until the end of 2026.

“Based on this information, we made significant improvements to our kitchen at a cost of about $70,000. We would not have made these improvements if these confirmations had not been made.”

While lunch prices may have dropped for the government and taxpayers, the change will also cost some schools money, Kelly said.

“The three schools we are losing, we are renting out the kitchen space so they will no longer be getting money from us so it will impact their finances.”

Kelly started her catering business after she and her husband were laid off and saw a gap in the market for healthy lunches for their four children.

Despite the government’s promises, Kelly did not believe that a $3 lunch price would be sustainable in the long term, given the rising costs of food, staff and infrastructure.

Compass and Libelle lost free school lunch contracts under the Department for Education’s performance management plan this year following complaints about the quality of food and service, BusinessDesk reported.

“How can we lose a contract when we did a good job, were never monitored for performance, and were liked by all our schools…companies that did such a terrible job?” – Kelly asked.

“They created a monopoly.”

When asked about the impact of the decision on small businesses, Seymour said his priority is to make the program cheaper.

“I recognize that some businesses will lose contracts under the new model. However, the priority must be to deliver meals at a price taxpayers can afford,” Seymour said.

“We cannot justify maintaining the old model when we can implement the program at half the cost.

“It is also important to acknowledge the many businesses and their supplier partners, some 20 of them, who make up the School Lunch Collective that will now be contracted to supply lunches.”

Seymour has previously opposed the free lunch program, saying in March that the program was “a huge waste of money and should be abandoned.”

In response to questions about current contractors being surprised by the sudden cancellation of their work, Seymour said “robust” processes had been followed.

“All existing contracts between the ministry and suppliers expire on December 24, 2024, according to the terms of the current agreement.

“The Ministry of Education has completed a thorough Registration of Interest (ROI) process. The process included advance notice that the transition to a new model might impact the business, giving them time to prepare for any upcoming changes.”

FreshChoice Westport has contracts with local schools in Buller and Gray, preparing and delivering around 1,700 meals a day for the past four years. Westport News reported.

The change means between 15 and 17 FreshChoice employees will lose their jobs.

What is Compass Group?

Global catering business Compass Group has come under fire in the past for its operations in New Zealand and around the world.

Compass lost free school lunch contracts after the Department of Education’s performance management plan was adopted this year, BusinessDesk reports.

Compass Group NZ’s contracts with DHBs have sparked controversy in the past, including protests outside Dunedin Hospital over what some patients described as “disgusting slop”.

In 2018, the company faced a major issue with its contract with Auckland health authorities, with one patient having an allergic reaction after receiving the wrong food and Starship Children’s Hospital experiencing 25 incidents in a year.

At the time of the incident, Compass said it worked closely with the Auckland District Health Board to ensure all meals were safe and nutritious and that any issues were resolved quickly.

In Europe, Compass Group came under scrutiny as one of the companies involved in the 2013 horsemeat scandal.

Jamie Leath is a multimedia journalist for the magazine. New Zealand Heraldfocusing on crime and breaking news. Lit began working under the guidance New Zealand Herald hat in 2021 as a reporter Northern lawyer in Whangarei.