By all accounts, Texas A&M got a sweetheart of an outsourcing deal.
The university system, to generate more revenue, outsourced more than a thousand staff positions in August, but it has taken months for the details of the deal to become public.
The Eagle has obtained contracts between the system and Compass Group USA, Inc. for dining services, landscape management, custodial services and building maintenance services. The North Carolina-based corporation took over the services at the beginning of the fall semester.
A Compass Group spokeswoman said it's the "largest contract of its type within the industry," and the corporation for months fought to keep the details confidential.
According to the contracts, the A&M System received $40 million of a $46.5 million signing bonus from Compass Group on Oct. 2. Chancellor John Sharp touted that amount previously and said the deal will be worth $260 million in extra revenue and cost savings over the life of the 10-year contract.
"My goal was to provide the most efficient and effective dining and facility maintenance services to our students, faculty and staff while respecting and maintaining the employment of our current members of those organizations," Sharp wrote in an emailed statement to The Eagle. "As I said, if successful, we would be in a position to better support our core functions of teaching and research as well. Today, I can say that we have been very successful in attracting a partner who completely shares our vision and we have obviously struck a huge financial deal to the benefit of teaching and research for A&M."
The Eagle requested copies of the contracts from the A&M system in August, Compass Group lobbied the Texas Attorney General not to release the information in a 25-page appeal in September, and the contract information was ruled to be public in October. The management giant argued that releasing its contract information with the public institution would harm its competitive edge.
"The size and scale of the incentives offered by Compass is unprecedented," wrote Compass Group lawyer Richard Keeton in his appeal to the attorney general. "Not only do the various agreements represent the largest combined services management program Compass has ever entered into for a university, it is the largest comparable deal in the industry."
Chartwells, a subsidiary of Compass Group, took over the dining services at Texas A&M University in August. It operates food service at 230 colleges and universities nationwide.
In the first year of the dining contract, A&M gets a 5 percent commission on retail sales, catering, conferences and meal plan sales. That percentage rises to 10 percent for the remainder of the contract. There is a minimum guaranteed commission that runs from $2.6 million per year to $6.2 million per year over the life of the contract.
The total contract value for what Compass Group will make is not specified. However, if the second-year commission rate is 10 percent with a $4.7 million guarantee, the company stands to pull in a minimum gross revenue of $47 million that year.
Chartwell has pledged to not increase the cost of meal plans more than 3 percent a year, pending fluctuations in operating expenses, and has agreed to
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