Compass Group‘s government contracts face scrutiny after a supplier complained to the Cabinet Office about the caterer's extensive rebate system.
Allegations that "huge rebates" levied by Compass were kept from its customers and that some non-food suppliers were charged rebates of more than 20%, were made by the supplier in a letter seen by The Sunday Telegraph.
However Compass managing director Ian Sarson said that the rebates were not concealed. "I think it's a widely known situation. We, as a company, leverage our scale on behalf of our clients and there will be rebates within that.
"I don't recognise 10, 20, 30% rebates]. We would want to look into that in more detail."
The supplier, who asked the Cabinet Office for his identity to remain confidential, said: "As you state that you require your largest suppliers to be more transparent ask all companies such as Compass for a copy of all their supplier or sub-contractor contracts/framework agreements.
"These documents clearly show the levels of hidden rebates that accrue to Compass and rightfully should have been acknowledged and identified to the Government."
Cabinet Office minister Francis Maude, who is spearheading Government efforts to clamp down on wasteful public contracts, is said to be taking the letter "seriously".
Documents outlining how two former suppliers paid double-digit rebates worth millions of pounds on work carried out for Compass on long-term contracts that ran until last year were also seen by The Sunday Telegraph.
Unit costs were "artificially" raised because those suppliers say they were able to pass on the rebate in full to the Compass sites servicing public and private sector contracts.
A Compass spokesman said that volume rebates are "part of the normal course of business" but confirmed the two suppliers' stories. "This is a legacy issue and is not part of how we do business today. The issue related to a very small number of historic non-food contracts and would account for less than 0.5% of UK total purchases that we bought at that time," he said.
Compass has gone through "a significant turnaround" in the past four years, which has resulted in "significantly increased transparency" said the spokesman.
The prices charged by Compass were independently checked "on a regular basis", he said, "to ensure we offer our customers the best possible value for money whilst earning a margin for the UK business of 6.4%."
By Janie Stamford
E-mail your comments to Janie Stamford here.
If you have something to say on this story or anything else join the debate at Table Talk - Caterer's new networking forum. Go to www.caterersearch.com/tabletalk
Looking for a new job? Find your next job here with Caterersearch.com jobs