Compass Group deals under scrutiny

18 November 2005
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18 November 2005 | Rebecca Ellinor

Compass Group has defended claims that it uses unfair tactics with suppliers.

Media reports have revealed details of a contract between the food service group and cleaning products supplier Robert Scott & Sons. One stipulation was that the supplier pay more than £1 million in advance fees to secure a deal worth about £1.5 million a year.

The reports were based on papers obtained by The Times regarding a three-year contract, which recently came up for renewal, between Compass and the Oldham-based manufacturer.

The reports claimed another condition of the contract was that Robert Scott mark-up its charge to the third party firm that distributes its products and pass the extra money back to the catering group.

While Compass Group admitted some of its contracts require suppliers to pay a lump sum it would not confirm details of this arrangement. It added that the papers obtained by the newspaper were a draft contract and not the final version. However, a company spokesman could not confirm whether the final deal was on different terms.

The group, which has a £5 billion annual global purchasing bill and around 10,000 suppliers in the UK, told SM deals where suppliers pay a lump sum is one of many kinds of contracts it operates.

"Compass has lots of different types of contract and this is one of them… paying a bit of a lump sum up front," said the spokesman.

He added that the company had worked hard in the past 18 months to improve relationships with suppliers by introducing clearer guidelines for buyers to ensure best practice and consistency, launching new key performance indicators with price no longer "necessarily the driving factor"; and paying suppliers faster.

SMnov2005

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