United States Government Accountability Office GAO Report to Congressional Committees July 2011 DEFENSE MANAGEMENT Actions Needed to Improve Management of Air Force’s Food Transformation Initiative GAO-11-676 July 2011 DEFENSE MANAGEMENT Actions Needed to Improve Management of Air Force’s Food Transformation Initiative Highlights of GAO-11-676, a report to congressional committees Why GAO Did This Study What GAO Found To assess quality of life and identify The Air Force established eight objectives for its Food Transformation Initiative, areas for improvement, the Air Force but it has not fully developed metrics or an evaluation plan for assessing the conducts periodic surveys of its initiative’s results. When GAO began its review, the Air Force had developed airmen. Recent surveys indicted that metrics for three of the eight objectives. The Air Force subsequently identified many of them were not satisfied with metrics for four additional objectives, but it did not have a robust evaluation plan, the quality, variety, and availability of as called for by best practices derived from prior GAO work and various guidance food at Air Force bases. As a result, documents, that describes how the initiative’s results will be measured. Without the Air Force implemented an initiative well-defined metrics, contained in an evaluation plan that is clearly linked to its in 2010—the Food Transformation objectives, the Air Force is not in a position to adequately assess the results of Initiative—to improve on-base food the pilot and make informed decisions about the initiative’s future. services. The Air Force piloted the initiative at six installations with a The Air Force has made some improvements to its food service operations as a $10.3 million contract awarded in result of the Food Transformation Initiative, but a key part of the initiative has August 2010 and plans to eventually been delayed, and it is too early to measure its results. The Air Force has expand the initiative to other obtained mostly positive feedback on the changes it has made, but the data installations in the United States. The collected to date are preliminary. In addition, the campus dining concept, which Senate and House Armed Services will allow airmen to use their meal cards to eat at on-base dining facilities other Committees directed GAO to than the main dining facility, had not been implemented at the time of GAO’s undertake a comprehensive review of review. Therefore, this concept, a key part of the initiative, could not be the initiative. GAO reviewed (1) the assessed. Furthermore, initial data show that the Air Force may have initiative’s objectives and performance underestimated some of the costs of the initiative, by overestimating the number measures, (2) implementation of hours military personnel can provide the contractor for cooking and food progress, (3) the initiative’s impact on preparation. food service workers at the pilot installations, and (4) alternative The Food Transformation Initiative, as implemented so far, has had varying approaches the Air Force considered. effects on food service workers. All military and civilian cooks at the main dining GAO reviewed documentation on the facilities have maintained their jobs, but some expressed concerns about initiative, interviewed Air Force and increases in their job responsibilities. Most contract mess attendant employees contractor officials, and visited four of have retained their jobs, but the total number of these employees has been the six pilot installations. reduced and some contract employees lost their jobs as a result of the initiative. Further, most civilian employees at nonappropriated fund food and beverage operations, such as clubs and snack bars, accepted jobs with the new contractor, What GAO Recommends but their job security remains uncertain as the contractor tries to make the GAO recommends that the Air Force facilities profitable and the remaining parts of the initiative are implemented. take several actions to improve The Air Force included three options in its analysis of alternatives in selecting its management of the Food method for improving its food services, but did not follow its own guidance for Transformation Initiative, including identifying and assessing alternatives that would meet the program’s stated developing an evaluation plan to objectives. GAO found that two of the three alternatives were not viable options assess the initiative’s results before to be considered because they only met three of the program’s eight objectives. moving beyond the pilot. In In addition, the Air Force may be able to reduce its food service costs by commenting on a draft of this report, the Department of Defense concurred reviewing and renegotiating its existing food service contracts at bases that are with all the recommendations. not part of the pilot program. View GAO-11-676 or key components. For more information, contact Revae Moran at (202) 512-3863 or [email protected]. United States Government Accountability Office Contents Letter 1 Background 3 The Air Force Has Established Objectives for the Food Transformation Initiative, but Has Not Fully Developed Metrics or an Evaluation Plan for Assessing Results 7 The Food Transformation Initiative Has Produced Some Food Service Improvements, but More Time Is Needed to Measure Results 11 A Key Part of the Initiative—the Campus Dining Concept—Has Not Been Implemented 19 Initial Labor Cost Information Indicates Savings May Be Less Than Estimated 20 Implementation of the Food Transformation Initiative Has Had Varying Effects on Food Service Workers 21 The Air Force’s Food Transformation Analysis of Alternatives Was Limited, and Other Options for Achieving Cost Savings May Be Available 27 Conclusions 33 Recommendations for Executive Action 34 Agency Comments and Our Evaluation 34 Appendix I Scope and Methodology 37 Appendix II Comments from the Department of Defense 40 Appendix III GAO Contact and Staff Acknowledgments 44 Tables Table 1: Dining Facilities at Each Pilot Installation 5 Table 2: Food Transformation Initiative Objectives 8 Table 3: Increase in Hours of Operation at the Main Dining Facilities 13 Table 4: Projected Cost of Dining Facility Renovations at Six Pilot Installations 16 Table 5: Change in the Number and Percentage of Meals Purchased at the Main Dining Facilities 17 Page i GAO-11-676 Defense Management Table 6: Number of Ability One Workers before and after the Food Transformation Initiative 23 Table 7: Number of Former Nonappropriated Fund Food and Beverage Operation Employees Who Accepted Positions with Aramark 25 Table 8: Employees Eligible for and Enrolled in the Nonappropriated Fund Retirement System 27 Table 9: Comparison of Labor Hours under Previous Contract to Labor Hours under the Food Transformation Initiative Contract 32 Figures Figure 1: Comparison of Customer Satisfaction Survey Results for Pilot Bases to All Air Force Bases, 2010 14 Figure 2: Entryway at Dining Facility, MacDill Air Force Base, Florida, before and after Initiative 15 Figure 3: Salad Bar at MacDill Air Force Base, Florida, before and after Implementation of the Food Transformation Initiative 16 This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Page ii GAO-11-676 Defense Management United States Government Accountability Office Washington, DC 20548 July 26, 2011 Congressional Committees Maintaining satisfaction with quality of life is a key ingredient in the Air Force’s ability to successfully retain needed personnel. To assess quality of life and identify areas where improvements are needed, the Air Force conducts periodic surveys of airmen. Through these surveys, the Air Force found many airmen were not satisfied with the quality, variety, and availability of food at Air Force installations. In an effort to improve satisfaction in this area, the Air Force developed a program—the Food Transformation Initiative—designed to improve the quality, variety, and availability of food while continuing the training of military cooks who feed airmen during deployments. In October 2010, the Air Force began piloting the initiative at six Air Force installations and plans to eventually expand it to other installations in the United States.1 On August 31, 2010, the Air Force awarded the contract for the Food Transformation Initiative to Aramark, a large company experienced in food service, and on October 1, 2010, issued a delivery order for an estimated $10.3 million.2 The contract covers a full range of dining services, including cleaning the facility and menu development, as well as providing input into the design of renovations for some of the existing dining facilities at the six pilot bases. It is anticipated that the renovations to the main dining facilities,3 expected to cost an additional $9 million, will generally be paid for by the Air Force, subject to funding caps. While the initiative is focused on improving food and service at the main dining facilities, a second element is to have the contractor operate the nonappropriated fund food and beverage operations, such as clubs and bowling center snack bars, because many of these facilities were losing 1The pilot installations include Elmendorf Air Force Base, Alaska; Little Rock Air Force Base, Arkansas; Fairchild Air Force Base, Washington; Travis Air Force Base, California; MacDill Air Force Base, Florida; and Patrick Air Force Base, Florida. 2In a decision issued August 2, 2010, we denied a bid protest concerning the Food Transformation Initiative solicitation. See John P. Santry—Designated Employee Agent, B-402827, Aug. 2, 2010, 2010 CPD ¶ 177. 3The Air Force calls its main dining facilities “mission essential feeding facilities,” which is also the term used in the contract. We use the term main dining facilities to refer to these facilities in this report. Page 1 GAO-11-676 Defense Management money and in danger of being closed. By including the nonappropriated fund food and beverage operations in the initiative, the Air Force will eventually be able to allow the installations to institute “campus style dining,” where airmen can use their meal cards to purchase food at different facilities at each installation.4 In reports accompanying proposed bills for the National Defense Authorization Act for fiscal year 2011,5 the Senate and House Armed Services Committees directed that we undertake a comprehensive review of the Air Force’s Food Transformation Initiative. In response, we reviewed (1) the initiative’s objectives and performance measures, (2) progress the Air Force has made in meeting the objectives of the initiative, (3) the initiative’s impact on food service employees at the pilot bases, and (4) the Air Force’s consideration of alternative approaches for transforming its food service program. To address these objectives, we interviewed Air Force officials about the development of objectives and performance measures for the initiative and assessed the objectives and performance measures in view of Department of Defense (DOD) and Air Force guidance and criteria from our previous work. In addition, we collected and analyzed data related to the initiative’s objectives, such as changes in the number of meals served and the level of airmen’s satisfaction with food services. To assess the reliability of these data, we discussed the procedures for generating and verifying the data with knowledgeable officials and, where possible, examined the data for obvious anomalies. Where we found limitations with the data, we presented that information in the report, but otherwise determined that the data were sufficiently reliable for the purposes of our report. We also interviewed contractor officials, union representatives, and food service employees about their experiences under the initiative and reviewed information on the impact the initiative has had on civilian food service employees, military food service personnel, food service contract workers, and employees at nonappropriated fund food and beverage operations. Further, we assessed the process the Air Force 4Certain junior enlisted personnel, primarily in grades E1-E4 and who are assigned to the dormitory, are usually placed on essential station messing. Enlisted personnel on essential station messing receive meals in the dining facility by presenting proper identification. In this report, we use the term meal card to refer to these benefits. 5See S. Rep. No. 111-201, at 115 (2010) (accompanying S. 3454); H.R. Rep. No. 111-491 at 264-265 (2010) (accompanying H.R. 5136). Page 2 GAO-11-676 Defense Management used in selecting the Food Transformation Initiative, including alternatives that were considered. We compared the Air Force’s business case analysis, which describes the alternatives considered, to the criteria provided in the GAO Cost Estimating and Assessment Guide6 and Air Force guidance. We also discussed with Air Force officials options other than the Food Transformation Initiative they could have considered for improving food service at other installations. We conducted this performance audit from September 2010 to July 2011, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. A more detailed description of our scope and methodology is included in appendix I. Background In the Air Force, food service program oversight is provided by the Air Force Services Agency, headquartered in San Antonio, Texas. The agency is responsible for oversight of the Air Force’s food service program, including developing the menus for the main dining facilities and providing training for military food service workers who assist in food preparation and the operation of dining facilities. According to Air Force officials, each Air Force installation contracts for mess attendant services, such as cleaning and cashiering services, at their main dining facilities and is responsible for awarding and managing these contracts. In addition, although many installations use both military and civilian personnel as cooks, according to Air Force officials, some installations have expanded their mess attendant services contracts to enable them to use contract employees to prepare and serve food. Depending on the availability of and priorities given to contractors located near the installations, according to Air Force officials, the installations may award these food service contracts to small business firms,7 contractors covered 6GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009). 7According to the Small Business Administration, a food service contractor is considered a small business if its average annual receipts are equal to or less than $35.5 million. Information on calculating annual receipts is provided in 13 C.F.R. § 121.104(c). Prior to November 5, 2010, the threshold for food service contractors was $20.5 million. See Small Business Size Standards; Accommodation and Food Service Industries, 75 Fed. Reg. 61,604 (Oct. 6, 2010) (to be codified at 13 C.F.R. pt. 121). Page 3 GAO-11-676 Defense Management by the Randolph-Sheppard Act,8 or contractors covered by the Ability One program.9 The Air Force Services Agency, which developed the Food Transformation Initiative and awarded the implementation contract for the six pilot installations to Aramark, is responsible for managing and overseeing the execution of the contract, along with a contracting officer’s representative from each base’s Force Support Squadron. Under the contract, Aramark is responsible for overseeing the day-to-day food service operations at the six pilot installations and planning and executing the menus. Aramark is also responsible for subcontracting for the required food service labor at the pilot installations and is required under its contract to subcontract with Ability One agencies for the main dining facilities.10 Aramark works with the Ability One agencies to negotiate the labor hours needed and the cost of labor at the pilot installations. Air Force officials plan to implement the initiative at a second set of up to eight installations after assessing the results of the initiative at the six installations in the pilot program. If the initiative continues to be successful, they plan to implement it at more Air Force installations in the United States over the next 5 years. Potentially, the Food Transformation Initiative could be implemented at all of the Air Force’s 149 appropriated fund dining facilities nationwide. 8The Randolph-Sheppard Act created a vending facility program in 1936 to provide blind individuals with more job opportunities and to encourage their self-support. See Pub. L. No. 74-732 (1936) (codified as amended at 20 U.S.C. §§ 107 to 107f). The program trains and employs blind individuals to operate vending facilities on federal property. Federal law gives blind vendors under the program a priority to operate cafeterias on federal property. See 20 U.S.C. § 107d-3(e). According to Air Force officials, the Air Force currently has nine Randolph-Sheppard Act contractors operating dining facilities. 9The Ability One program, formerly referred to as the Javits-Wagner-O’Day Act program and codified at 41 U.S.C. §§ 8501 to 8506, provides training and employment opportunities for persons who are blind or have other severe disabilities through the purchase of products and services from nonprofit agencies employing these individuals. If a product or service is on the procurement list maintained by the Committee for Purchase from People Who Are Blind or Severely Disabled, a government entity intending to procure that item or service generally must procure it from a qualified nonprofit agency. See § 8504. Federal Acquisition Regulation provisions implement the program. See 48 C.F.R. subpart 8.7. 10The contract contains a Statement of Objectives for each pilot location, each of which indicates that Ability One participation is not required at nonappropriated fund food and beverage resale operation locations but is encouraged. Page 4 GAO-11-676 Defense Management Initially, the Food Transformation Initiative focused on improving food service at the pilot installations’ main dining facilities by increasing the hours of service, remodeling the dining facilities (using money provided by the Air Force), developing new menus, and providing an executive chef at each location. In addition, the main dining facilities were opened to all installation personnel. Previously, the main dining facilities at most installations were not available to all installation personnel. According to Air Force officials, the potential increase in customers by opening the dining facilities to all installation personnel is a key component of the initiative because making greater use of a facility, which has fixed overhead costs, could help defray the costs of providing meals. According to the Air Force, the initiative also offered installation commanders the option of turning over their nonappropriated fund food and beverage operations, such as bowling center and golf course snack bars and officers’ and enlisted members’ clubs, to Aramark in a commission-based contract.11 Table 1 lists the pilot installations and dining facilities included in the Food Transformation Initiative contract. Table 1: Dining Facilities at Each Pilot Installation Air Force Nonappropriated fund food and installation Main dining facilities beverage operationsa Elmendorf  Iditarod Dining Facility  Eagle’s Nest Café at the Eagle Glen Golf Course  Kenai Flight Kitchen  The Warehouse Grill at the Kashim Enlisted Club  Paradise Café at the Community Center  Hillberg Snack Barb Fairchild  Warrior Inn  Funspot Bowling Center Snack Bar  Warrior Inn Express  Ross Dining Facility  Comingled lounge at the Bowling Centerc  Flightline Feeding Facility  Final Point at the Club Annex Little Rock  Hercules Dining Facility  Deer Run Golf Course  Flight Line Kitchen  Strike Zone Café at the Bowling Center  Hangar 1080 Club 11The contract and orders under the contract use the terms concessionaire or commission rate in describing the nature of the contract. Page 5 GAO-11-676 Defense Management Air Force Nonappropriated fund food and installation Main dining facilities beverage operationsa MacDill  Diner’s Reef  Bay Palms Golf Course Snack Bar  Flight Kitchen (colocated with Diners’ Reef)  MacDill Lanes Snack Bar at the Bowling Center  Bayshore Officers’ Club  Boomer’s Bar and Grill – Enlisted Club  Seascapes Beach Club – All Ranks Club Patrick  Riverside Dining Facility  Manatee Cove Golf Course Café and Lounge  Riverside Flight Kitchen  Rocket Lanes Ten Pin Café  The Tides Club and The Blockhouse – Enlisted Club Travis  Sierra Inn  Gatsby’s Grill at the Golf Course  Sierra Inn Grab and Go  Strike Zone Grill at the Bowling  Golden Bear Flight Center Kitchen  Delta Breeze Colocated Club  Rickenbacker’s Coffee Shop Source: GAO analysis of Air Force information. aAs represented by the Air Force. bThe Statement of Objectives includes seasonal operation of the Hillberg T-Bar Grill among the potential future dining opportunities, available for incorporation into the delivery order at the installation’s discretion. A modification to the initial nonappropriated fund order for Elmendorf adds a line item to allow the contractor to operate the Hillberg facility snack bar from February 7 to March 31, 2011, based on specified terms and conditions. The modification states that “[n]o commissions will be paid due to the partial season and timeline” and that a “reassessment of the operation will occur after completion of the season before additional seasons are addressed.” cThis facility does not appear on the nonappropriated fund order with the contractor, but the Statement of Objectives for Fairchild Air Force Base indicates that the installation desires to develop a comingled bar/lounge adjacent to the snack bar. Traditionally, nonappropriated fund food and beverage operations have been part of the installations’ morale, welfare, and recreation program run by nonappropriated fund personnel employed by nonappropriated fund instrumentalities at each Air Force installation.12 According to Air Force officials, these food and beverage operations have been losing money, and including them in the contract with Aramark was an attempt to make 12Nonappropriated fund instrumentalities are organizations that typically provide for the morale, welfare, and recreation of government officers and employees. Employees of armed forces nonappropriated fund instrumentalities are generally not deemed to be employees of the United States except as specifically provided by statute. Page 6 GAO-11-676 Defense Management