Taking Stock

When a request for a new steam kettle came across his desk, Peter Mavridis says it struck him as odd that this large piece of equipment, powered directly by steam, was so broken that it was beyond repair.

“There aren’t that many moving parts to a kettle,” explains Mavridis, Project Officer, Food Services Program, Correctional Service of Canada (CSC). “I asked the facility to do a little investigation, take some photos, really identify the problem.” It did, and the department ended up paying $8,000 in repairs rather than $60,000 in replacement costs. “That’s $52,000 saved in just one example.”

Was this an anomaly? Mavridis was pretty sure it wasn’t; in fact, it was one example of many that started him on a mission to establish a comprehensive equipment management program for CSC, headquartered in Ottawa, Ontario, Canada.

Enjoying Autonomy

CSC, Canada’s federal corrections authority, has 57 facilities in five regions across the country. The facilities range from traditional maximum security prisons to medium security units to minimum-security, independent living residences, also called responsibility units. The CSC even includes healing lodges for the country’s aboriginal offender population, a progressive rehabilitation approach started about 10 years ago.

Foodservice equipment to serve the 14,700-plus inmates incarcerated in these facilities ranges from heavy-duty, commercial-grade correctional packages in the institutional kitchens to lighter-duty, residential brands in the responsibility-style units’ communal kitchens. Until recently, every one of the 57 facilities identified its own equipment needs and made requisitions independently.

“We had a standard five-year equipment replacement schedule,” Mavridis explains. And depending on the cost of the goods, the requisitions for equipment would go through various approval channels. Public Works and Government Services Canada (PWGSC), the procurement authority of the federal government, delegates authority to agencies to do procurement.

For the purposes of goods, budget managers such as those in Mavridis’ department, can approve purchases up to $10,000 (including the Goods and Services Tax); these purchases are considered Operating and Maintenance budget items. Individual equipment purchases between $10,000 and $24,999, including GST, go through Regional Contracting Specialists and are considered capital goods. Anything that costs $25,000 or more also is a capital good, but is procured directly through PWGSC.

“There are exceptions to manage emergencies, and rules change when there are procurement vehicles in place like Standing Offer Agreements, Supply Vendor Arrangements and Contracts,” Mavridis says.

With their independent–<I>but limited<I>–budgets, each facility would often opt to wait and replace equipment rather than spend allocated funds on costly repairs or preventive maintenance programs, he explains. The system relied on each facility’s expertise to manage its own equipment needs, and to decide how it spent its budget.

From Advice To Action

While each facility understandably likes having control over its equipment requisitions, Mavridis’ department was in the unique position to see inefficiencies in the system.

The problem with a decentralized approach, he says, is that there is no effective central oversight. He sites one example of a requisition that came through from one facility: $100,000 for 16 transport carts. “I found out that this facility had already asked for this amount for new carts in 2007,” he explains. “So it didn’t make sense.”

A record review revealed the facility had indeed received the requisitioned money, but it ran out of time and let the funding lapse without making the cart purchase (facilities cannot carry budgets over to the next year), so the funding went to meet other internal funding pressures instead. In the meantime, no new carts.

In another example, new equipment sat in storage because, post-purchase, the facility did not have the time or resources to complete the installs with site maintenance staff.

The decentralized approached also meant there was little-to-no communication between facilities, and no standard equipment specification, he adds.

“If we could just gather the right information, our department could become a very effective clearing house for not just efficient equipment procurement—i.e. buying standard equipment in volume—but eventually we could be the resource for much more, including installation, training, service protocols and preventive maintenance,” he explains.

When he first started to formulate a program to manage equipment more efficiently, Mavridis says the facilities questioned if this would add another level of bureaucracy to the process. “It was important for them to understand that we intended to add value, not take away their control.”

The undertaking was overwhelming; Mavridis’ department  needed to gather so much information before it could make any changes or implement new guidelines or procedures.

“But I had a mentor once who told me that anything worth doing was worth doing poorly,” Mavridis laughs. “In other words, you can’t let yourself become paralyzed into inaction by the scope of a task; don’t worry about getting it perfect, just dig in and get it started.” 

Gathering Information

“So the first step we took in 2008 was to survey the facilities to find out what equipment they were planning to buy,” he says. “We started asking questions.” Mavridis’ survey asked how facilities were using equipment, where they were using it, what their mechanical, engineering and plumbing (MEP) requirements were, and much more, in a standardized form.

That in turn allowed his department to begin the process of developing standardized specs and to start coordinating volume buys. Mavridis gives a great example of how this procedure started to pay off quickly.

“Some facilities were purchasing a high-end combi oven,” he says. “But we found out that most were using less than 10 percent of the features on it.” So Mavridis began to gather requirements and developed a spec for a combi (based on what the facilities said they needed the combi to do) that didn’t cost as much as the high-end model. “We saved $350,000 and were able to purchase additional combis.”

Info In, Savings Follow

With robust information in hand, Mavridis’ department has started to purchase in multi-year contracts to realize even more savings. “We know, for example, that facilities are going to purchase items such as milk dispensers, griddles, conveyor toasters, reach-in refrigerators, food processors and slicers,” he explains. “So we say to vendors ‘We’ll be buying a large number of units, but we’ll take so many this year, so many next year, and so many the next.’”

With some equipment coming in over a multi-year contract, it could mean that a facility has to hold off until the next year to get a new model. “Typically, that’s not a problem, but emergencies pop up, and if we need to replace a piece of equipment off cycle, we’ll do it,” Mavridis says. “Or we find some way to get them through until the new model ships.”

Another other big change in the bid process is that vendors have to quote costs with some equipment “set in place.” That means uncrated, installed, plugged in and working. “Facilities didn’t always ask for quotes that way, and it left a lot of room for miscommunication and confusion over who’s responsibility it was,” Mavridis explains.

“What it also does is allow us to get a handle on and control over installation costs.” Mavridis and his team know what the average hourly rate for a gas fitter should be, for example, so they can vet the vendor’s install quote, compare it to the cost of local gas fitter and choose the less expensive option. “The end result is many of the formerly ‘hidden’ costs are actually pre-costed now,” he says.

Vetting Vendors

For big ticket capital goods, Mavridis, Project Officer Robert Neil and their team, are developing formal, standard specifications for myriad equipment categories that they will supply to PWGSC. “We are exploring the development of an Approved Supplier List, a list of vendors whose equipment meets our specs,” Mavridis says. “PWGSC will then take our generically written specs to those vendors for an RFP.” By asking PWGSC to refresh the vendor list on a set schedule, new vendors also will have a chance to bid, keeping the bid process competitive, and hopefully keeping costs down.

What’s Next

The CSC’s equipment management program is becoming more sophisticated and robust every day. In phase two, Mavridis will be hiring consultants to visit sites to conduct in-depth inventories of existing equipment. So while phase one concentrated on what facilities intend to buy; phase two focuses on what they have. “We’ve inventoried 19 sites in 2009, another 12 scheduled for this year and we’ll have all of them done in the next few years,” Mavridis explains.

The inventory forms are highly detailed and will be invaluable in maintaining and servicing equipment in the future, according to Mavridis. “Once we know what we’ve got, we can get a handle on what we have in common,” he explains. “Then we can start to negotiate some very effective preventive maintenance and service contracts from outsourced suppliers.”

By standardizing equipment procurement, negotiating lower pricing through volume purchases, servicing existing equipment rather than buying new and establishing effective preventive maintenance programs, the CSC Food Services Program stands to save millions.

In fact, even though the new process is still in its infancy since beginning in 2008, Mavridis says equipment requests so far this year are in the $2 million range, down from the norm of $3 to $5 million per year before the program began. And the more the program evolves, the more savings the CSC will see.

Equipment Inventory  

The CSC Food Services Program created a site survey form to record every piece of foodservice equipment in existence in the system’s 57 correctional facilities. Below is a sampling of the kind of information surveyors hired by CSC are gathering. Surveyors are instructed also to take photographs of the equipment and work space to enhance the report.

v  Location of equipment

v  Equipment name and description

v  Model numbers

v  Serial numbers

v  Power supply, plug type, amps, phase, natural gas, propane, BTUs

v  Age of equipment

v  Dimension and sizes; door swing

v  Accessibility, ramps, location and logistics issues

v  Estimated replacement value

In 2010, the Food Services Program department implemented an even more automated and detailed approach. The department purchased data collection devices and inventory capture software.