(originally published in the Stony Brook Press, October 15, 1997)

By Stephen Preston

The Birth of Advantage

Now the main business is to expose some more problems with the Advantage Plan generally and Aramark in particular. Let's begin at the beginning: two years ago, when the Advantage Plan was first chosen. (No, not one year ago, as many believe, but we'll get to that later.) I will be referring to an untitled document written by Dawn Villacci as a member of the FSA's Food Finance Committee, a small group composed of herself and others whom she does not recall (except for the fact that one of them was Polity treasurer). This committee met before the Bidding Committee had sent out its Request for Proposals, and long before anything was published in the Statesman about the possible new meal plan.

At some time during the Fall of 1995, the Food Finance Committee was devising a new meal plan to try to solve some of the problems they felt existed with the old meal plan. One concern was unhappiness with the inconvenience of the dining halls, and so the new meal plan would be designed to allow students to eat at fast food establishments in the Student Union and Humanities. The other major concern was this, mentioned in the Declining Balance plan: "Students are unhappy with the difference between what they are charged for the meal plan ($995) and what they actually get to spend ($850). They do not understand what this difference represents, and believe they are getting 'ripped off.'"

This is of fundamental interest: note carefully the words used. The fact that resident students pay $145 more than commuters or grad students would for the same items is not a problem in itself; the problem is rather that students "believe they are getting 'ripped off.'" Thus FSA's goal was not to devise a fairer system, but to keep the students from believing the system was unfair. After recommending essentially the same Advantage plan we have now, they concluded: "We believe that although it is basically the same meal plan in a different formatŠ, positive student perception of the resident meal plan will increase, as it did in Binghamton [whose meal plan was used as the basis for Advantage]."

Now, you have probably read John Giuffo's 3-part series on the Advantage Plan from last Fall (available on The Press's web site) and have probably also read Miriam Schussler's article as well (which should be available at the Polity office). Both of these gave an approximate way to compare Advantage and Retail prices, which generally portrayed Advantage prices as being tremendously inflated. The general reaction of the FSA's professional staff was that such comparisons were just unfair, since food cost is not related to retail price in any simple way, and one could not simply average things out. However, the Food Finance group had already done a simple calculation, using an average cost-to-retail ratio of 38%, and obtained the following estimate: "The committee proposes three price levels: $915 (providing a student $202 to spend, which translates into $531 of retail spending money); $1065 (Šwhich translates into $925 of retail spending money), and $1200 (Šwhich translates into $1280 of retail spending money)." The middle figure of $1065 would eventually become, of course, the "Standard Advantage Plan." It is interesting to compare this plan with the previous plan: in the old declining balance plan, a student paid $995 for $850 of goods, getting overcharged $145; in the standard Advantage plan, the student would pay $1065 for $925 of goods, getting overcharged $140. Did they feel this $5 reduction would pacify students? Of course not! They felt that students simply would not notice as easily that they were still getting overcharged the same amount under the new plan. This is why every time someone proposes that the Advantage prices are too high, the response from the FSA is that the figures are not being calculated correctly.

Now why was the FSA pushing for the Advantage Plan so early? The reason I've been given is that the FSA staff, including Kevin Kelly and Dawn Villacci (who seem to have been pushing for it quite early), naively underestimated and misunderstood the roots of student discontent. When asked if he thought recommending the Advantage Plan might have been a mistake, or if he would have done anything differently, Kelly responded that the only real mistake with Advantage was that it was not close enough to Binghamton's plan. Binghamton's plan was, he said, a far worse deal, but FSA should have given it to students because they wouldn't have complained so much. He gave the impression that the reason students were unhappy was that they did not understand the plan, and that the complaints of overcharging were generally unjustified.

 
I Think I Left Those Million Dollars In My Other Pants

I have a copy of Aramark's Profit-and-Loss (P&L) statement, covering the 1996-1997 academic year. Aramark claims to have lost $38,000 over the entire school year (total revenues were about $12 million). There are some serious problems with this claim, however. I will be referring to two sets of numbers. The first is from the 2-page ad that the FSA and Aramark purchased in the Statesman last year, saying "You have every right to know where your money goes!", etc. (Statesman or the FSA will give you a copy of this if you want it.) The second is the actual P&L submitted to the FSA. (I believe the FSA will give it to you, but if not, I will.)

The first important number is the total ("meal-plan-related") operating expense. The advertisement computes this to be $6,001,599. It is then estimated that 8800 plans would be sold for the entire year (the FSA admitted early that this was a conservative estimate), and thus that each plan would pay for a share of $682 of the fixed costs (later lowered to $680). The second important number is the amount Aramark actually got to cover these expenses. According to Dawn Villacci, a total of 9550 Advantage meal plans were actually sold during that year, which implies that Aramark received (9550 x $680 = ) $6,494,000. The third important number is the amount Aramark claims it received on its P&L, which is $5,626,792.60. There are two obvious things to note here. Firstly, the estimate of students on the meal plan was off by 750 for the year, a rather large difference which amounts to an overpayment of the $6 million fixed cost by half a million dollars (this money is pure profit for Aramark). Secondly, Aramark seems to have lost $900,000!

Now I've been skeptical of Aramark, but I really tried to get some kind of explanation for these missing million dollars. I went to Dawn Villacci (who is the official link between students and Aramark on financial/contract matters), who didn't know. She called Bruce Incontro, an Aramark accountant, who seems to have never gotten her message and who wouldn't tell me anything when I asked him. (He told me seven times that he had "nothing to hide," which makes me suspect he was hiding something.) Incontro sent me to Ken Johnson, a FSA accountant, who also did not know and who tried to send me back to Incontro. But Incontro decided that it would have to wait until after this story was written, perhaps to give Aramark some time to find an excuse.

The underestimation of the number of students on the meal plan seems to be systematic. The FSA estimated 8800 last year, when the actual number was 9550. This year, FSA and Aramark estimated 9550. Obviously the actual number will be higher than that, because as we all know, the Administration admitted many more students than last year. With Administration planning to continue increasing enrollment by about the same rate until 2000 (or beyond), it seems likely that resident students on the meal plan will overpay by around half a million dollars every year. This would seem totranslate directly into an increase in profit.

There are also other suspicious things on Aramark's P&L worth investigating. Here are some tidbits: Aramark claims its total labor expenses were $4.39 million, though it had budgeted $3.46 million; and Aramark claims its total "direct expenses" were $1.42 million, though it had budgeted $0.92 million (Part of this comes from an increase in a mysterious "Other" category, which is $300,000 over budget. Another part comes from "Cafeteria supplies", which we know are either supplied by the FSA or are charged to students, i.e. the plates, cups, etc. These amount to $350,000, about $100,000 over budget.). Now, either Aramark's accountants and managers skipped their Budgeting 101 class, going under budget in almost every revenue category and going over budget in almost every cost category; or Aramark is being less than candid. Both are entirely possible.

The interesting thing is that the FSA does not have anyone investigating the Profit and Loss document. The FSA says the person who would ordinarily do that is on maternity leave, and the three people substituting for her are not doing this particular task. This is extremely odd. Wouldn't you think that if Aramark were making over $1 million in profits, the FSA would want to lower the cost of the meal plan? It would seem reasonable for the FSA to want to go over this document carefully and investigate discrepancies, but the FSA's accountants don't seem to care. Thus, through either deliberate acts or carelessness, the FSA seems to be handing over an enormous amount of money to Aramark. This is only one of the many things that bother me about the FSA. Here's another one.

 
"The Contract Isn't Written in Stone."

That is a quote from the FSA's Contract Administrator Dawn Villacci, in response to my question as to why the prices and hours specified in last year's contract have been changed so freely. We all know about the change in hours, but it has been harder to determine all of the changes in prices. I will have to go over them as part of the FSA Dining Service's Pricing Subcommittee, and if you have noticed any discrepancies between last year's pricing and this year's, or between prices of the same item at different locations, you should send an e-mail to me (preston@math.sunysb.edu). But while we may not have comprehensive data on exactly which prices have been changed, we certainly know that they have. Although there was a price list included with the contract, it was not binding in the contract ("At the end of each academic year, Aramark shall propose to the FSA price changes of those items that have increased/decreased in price. The FSA reserves the right to request documentation to be certain these price changes are justified. The exact increase/decrease will then be passed on to the customer"), and it has been changed frequently.

Here's another interesting thing, a correction to my last article. According to the contract, "Aramark shall have the exclusive right to provide food service at the locations set forth on Exhibit A" Exhibit A does not include the SAC. I could find no mention in the contract of any clause stating that if SAC had accepted a meal card, then Aramark would have to run the SAC. It seems as though the SAC could have been contracted out without affecting the contract. But this may be an oversight on my part, and is not terribly important.

Another clause of the contract: "Aramark shall provide monthly operating statements to the FSA with comparisons of actual expenses to budgets, as submitted. The Contract Administrator and the Resident District Manager will review these statements on a monthly basis. Attempts will be made to make adjustments to meet budget targets as necessary and appropriate." The meaning of this seems to be that if Aramark is over or under budget, then the budget should be modified. In particular, if the number of students was high enough that Aramark's revenues ended up being $500,000 over budget (as it apparently was), the price of the meal plan should have been lowered and the difference refunded. So taking the contract literally, one would conclude that either Aramark has been giving figures to the FSA which are accurate, and the FSA has not lowered the cost of the meal plan (in apparent violation); or Aramark has been giving inaccurate figures to the FSA. I cannot be sure as to what extent this violates the contract, but it is certainly bothersome to me.

This contract was written to last two years, with possible renewals. Two years is not a long time. Inflation is not so high that prices will change drastically, and the contractor would not lose much money if they did. The University landscape does not change over a two-year time period without anyone knowing about it beforehand. This contract did not need to be rewritten in the middle of last year. The FSA does not need to modify the contract to ensure Aramark a large enough profit to keep it on campus; Aramark would not dare to break its contract and abandon the campus for such a reason. If it did, it would never be able to get another campus to contract it. When the next contract is written, we must demand that it cannot be changed, and we must have strict penalties for any violation of it. In the meantime, we should demand that the FSA uphold what little is left of the original contract until it expires, and that Aramark refund any revenue obtained by overcharging.
 

Conclusion

The FSA has done much to ensure that Aramark would not lose money. It did not request the usual 15% on catering sales, so as to help make catering more profitable (it ended up losing $70,000 anyway, if one believes Aramark's figure). It has not carefully checked Aramark's P&L statements. It has allowed Aramark to raise prices at any time, and has not penalized them for prices which it found had been too high. It has given Aramark an extra $500,000 profit by overcharging students for their fixed cost. It has penalized them a total of 40 times, for a piddling $100 each, for gross violations such as temperature problems and pricing inaccuracies. (Kevin Kelly has stated that, because of the method used to assess penalties, there is an extremely low probability of Aramark getting caught).

Who is to blame? The thief who steals your wallet, or the policeman who watches idly as it happens? I have been told that it's all Aramark's fault, and I have been told that it's all the FSA's fault; I'm not sure which to believe. The one thing I am sure about is that it is not the students' fault, and you cannot let either FSA or Aramark tell you otherwise. The FSA must ensure that students are not getting ripped off; it is not enough to ensure that students don't believe they're getting ripped off. The FSA is the only group capable of checking Aramark in its profit-mongering.

I encourage you to go to the Aramark offices on the second floor of the Student Union (right next to the entrance to End of the Bridge) and demand to know exactly what happened to the Missing Million. But be careful as you approach: hold your wallet or purse close to your body, don't wear a lot of expensive jewelry, and make sure there are a lot of other people in the area in case you have to yell for help.

The Faculty Student Association, on the other hand, must be accountable directly to the students. The Dining Service Committee meets every Monday at 12:30. The room keeps changing every week, but Diane Lopez at the Polity office in SAC should be able to tell you where it is. Tell them exactly what you want from your meal plan, or write to me and I will try to represent you there. If the Dining Service gets contracted out again this year (though it might be better if it didn't), we will need the contract to be set in stone. Any other way just leaves the door open for abuse.