The Reality and Reform of Institutional Food Procurement

Aramark building with trucks
jetcityimage / Getty Images

Individuals throughout the U.S. continue to find their food-related choices constrained by structural factors, such as food availability at the large institutions that they frequent. In a 2016 report, Instituting Change, released by The John Hopkins Center for a Livable Future, authors Claire Fitch and Raychel Santo provide an overview of institutional food procurement and rationale for working toward reform.

According to Fitch and Santo, in 2014, the three largest food service management companies (Compass, Aramark, and Sodexo) reached nearly US$33 billion in revenue in North America. Major institutions, such as schools, hospitals ​and prisons, often opt into agreement with large food service management companies for financial and administrative benefits. While this agreement is often able to provide notable returns to the institution, namely in improved efficiency, reduced costs, and lower prices for the consumer, it, as a product of the widespread industrialization of the American food system, carries notable ties to current environmental and societal challenges. As Fitch and Santo indicate in the report, vertical integration along food supply chains is “implicated in the decline in value of workers’ wages, and the loss of farmers’ and citizens’ autonomy over food production, processing, distribution, and sales.”

Regional Food Procurement

As widespread interest in the U.S. food system continues to grow, so too does interest in institutional food procurement and the potential for a regional, sustainable food procurement system. As Fitch and Santo highlight, continued reform to the current food procurement process can initiate considerable change with extensive socioeconomic, environmental, and health considerations.

Research indicates that regional food procurement amongst institutions is on the rise. Despite this progress, several perceived barriers, such as the administrative burden of identifying and purchasing from regional producers, inconsistency in supply, and fluctuating prices, continue to prevent institutions from sourcing, or fully sourcing, regionally and sustainably produced food. Many of the perceived barriers, as well as potential strategies for overcoming them, have been addressed in other research. As such, Fitch and Santo focused particularly on one barrier—the rebate pricing system present in food system contracts—which prior to this report had been left largely unaddressed.

The Rebate Pricing System

This practice, in which large food management companies ask for a rebate on a certain percentage of the sales of a product, forces the supplier to “mark up the price by that amount so that the client—the institution—pays an inflated price, and the difference goes to the management company”, explains Fitch and Santo in “Instituting Change”. Since the turn of the 21st century, Volume Discount Allowances (VDAs), or rebates, have become a considerable component of the food service business model. Their significance, combined with the lack of transparency surrounding the value of current rebates, adds a layer of complexity to the development of a regional, sustainably produced food procurement system. Santo and Fitch conclude in the report that, “The implicit expectation of rebate payments to food service management companies may encourage independent regional producers to increase their prices in order to enter the institutional food service market, or—if regional producers are unwilling or unable to raise their prices and offer rebates— may prohibit site managers from being able to purchase from regional farms.”

While greater reform to the rebate system is critical, Fitch and Santo acknowledge the efforts of government programs, such as USDA’s Know Your Farmer, Know Your Food, and organizations like Health Care Without HarmNational Farm to School NetworkReal Food Challenge, and School Food FOCUS. These efforts, which have enabled more institutions to source from small and mid-sized local farms, foster transparency and have the potential to lead to broader efforts to create a more equitable food procurement pricing system.

Calls for Reform

The report culminates with recommendations on ways individuals, institutions , and policymakers can contribute to the reform of the institutional food procurement system. These suggestions include:

  • Consumers of institutions continuing to voice their ideas on ways to improve their institution’s procurement policies. Finch and Santo suggest the use of existing tools, such as the Real Food Challenge, which offers a campaign toolbox for students interested in influencing their college or university’s procurement policies. Additionally, the Real Food Guide offers guidance on developing criteria for the purchase of regional, sustainably produced food.
  • Food service employees and decision makers within institutions taking a closer look at existing policies and contracts and continuing to voice their requests for an improved food procurement system.
  • Policymakers supporting legislative efforts around procurement policies that have succeeded in other states, such as the mandated preference for food products grown or produced within state in Massachusetts.
  • Joining the local food policy council, writing locally elected officials, hosting events to raise awareness of the impact of institutional procurement policies, or volunteering with an organization that is already working on these issues.  

    In addition to these specific recommendations, Fitch and Santo declare the importance of improving and increasing the public’s access to institutional procurement policies and records. As they assert in “Instituting Change”, “increased transparency will lead to improved practices.”

    Additional tools and resources for those interested in facilitating a shift in procurement policies can be found in the final section of the report (pg. 31-32).

    Was this page helpful?