DfE ‘unconcerned' over profiteering from £425m free school meals contract

Despite “serious problems” with the scheme which left 40,000 voucher codes not delivered to families, DfE has extended Edenred’s contract twice since April last year, the report states.

Combined, the extensions increased its value from £78m to £425m, PAC says, adding that DfE made no attempts to renegotiate any of the terms or introduce any profit-sharing element. 

“DfE considered it achieved good value for money because it did not pay Edenred anything more than the face value of the vouchers issued to families. 

“However, Edenred bought the vouchers from supermarkets at a discount, and DfE could have chosen to try and renegotiate how much it paid Edenred per voucher and so reduce the cost to the taxpayer”, the report states.

It adds that DfE did not use an open book policy included in the contract to check on Edenred’s income and costs “until after the end of the scheme”. 

“DfE now says that it is “very comfortable” with the level of profit Edenred made from the scheme, but has provided no figures or explanation of any kind to back up that judgement,” the report states.

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Despite the contract extensions, which should have allowed the scheme to be reactivated within 24 hours where needed, it did not restart until weeks after schools closed for a second time on 5 January, the report adds.

It also criticises issues faced by schools and families when the scheme was launched in April last year. 

“There were unacceptable delays in Edenred processing orders from schools and getting vouchers to families,” the report states, highlighting almost 4,000 calls to the organisation's helpline on 14 April alone. 

Edenred’s failure “to put in place enough capacity to handle the number of calls from schools and families” led the company to rely on an outsourced contact centre to help, the report adds, stating that DfE now “recognises” it should have “user tested” the scheme before its launch.

Its failure to do so led to both DfE and Edenred only becoming aware of 40,000 missing voucher codes, which had been paid for but not delivered to families, in May - a month after the scheme started.

The report also criticises DfE’s lack of understanding of whether the scheme was meeting the needs of families as “it did not receive data on performance – for example, how long Edenred was taking to process orders, or how long schools and families were waiting to access Edenred’s website to convert eCodes into vouchers”.

DfE was also unaware of the distance families were forced to travel to visit supermarkets taking part in the scheme, the report states, despite 11.5 per cent of all schools being at least 5km away from a participating store.

In a series of recommendations made in the report, PAC has advised DfE to “strengthen its commercial skills” and “collect complete management information specified in contracts from the outset, monitor performance as well as activity, and use this information to manage contracts effectively”.

Meg Hillier MP, chair of the Public Accounts Committee, said: “Whether it’s getting life-saving equipment to frontline workers or food to hungry kids in poorer families, government’s failure to learn from its repeated contracting mistakes, over and over, large and small, is costing this nation too dear.

“After the initial urgency we have seen the Government continuing to play catch up on how to support families whose children are entitled to free school meals, and despite the contract with Edenred growing more than five-fold there was no discussion about tendering the contract or even renegotiating it.”

A DfE spokesperson said: “There is no evidence of any ‘profiteering’ through the national voucher scheme. In its investigation the National Audit Office acknowledged the rapid action this Government took to deliver free school meals for eligible pupils, the significant improvements that were made to the scheme and our oversight of it.  

“We have already made further improvements to the scheme which take account of the recommendations in this report, including improving the terms of the contract to ensure the better value for money for taxpayers.

“The scheme has been tested extensively and extra support for schools and parents has been provided, resulting in an efficient system with £47 million worth of eCodes redeemed as of Wednesday - 96% of parents say they are happy and satisfied.”

Edenred has been contacted for comment.