Compass Group Ascension Health Decision

The case describes the selection and negotiation process for the provision of a $2 billion multi-service FM contract. The client is Ascension Health, an American healthcare provider with a portfolio of 86 hospital sites nationwide. It hopes to appoint an FM provider to deliver food and environmental support services to all of its hospitals. In the final negotiating round Compass emerges as the preferred bidder. However it transpires that the final decision for appointment is not completely straightforward. Ascension’s decision hinges on dissatisfaction with the Compass Group’s multi-sector model of company organisation and service delivery.

The Compass Group operating strategy is based on dividing up service contracts across multiple sectors instead of having a dedicated healthcare sector. This is partly historical, as Compass acquired various companies it also allowed them to retain their management teams and cultures. The beauty of this model is that it allowed Compass to cover a wide range of sectors and develop specialisms in targeted areas. For instance, Morrison Healthcare provides food within the healthcare sector and Crothall Healthcare provides the environmental services. These two sectors are relevant to the Ascension contract. Between 1995 – 2011, Compass succeeded in increasing its North American revenue at an annual compound rate of 16% and profitability at 20%, thereby demonstrating the success of acquisition and multi-sector provision.

The chart below (Exhibit 5) shows the Compass Group sectorisation and shared services. A key point to note is that there is a dedicated food purchasing department which services all sectors. Additionally some services are shared across all sectors.

One of the key decision makers on the client side is Scott Caldwell who heads the Ascension Resource Group. He has requested that Compass agrees to act as a single streamlined source providing both food and environmental services. With the multi-sector approach he has concerns relating to disparate service line management. Specifically, communication, accountability and problem solving in dealings with the FM provider. These issues are of significance to Ascension, particularly as this is its first attempt to appoint a nationwide service provider.

In responding to Scott Caldwell’s concerns, Gary Green, the CEO of Compass is faced with a number of options, which are discussed below.

One option for Compass is to demonstrate the success of its multi-sector model both economically and in terms of service provision for its customers. For example, it has a $100 million multi-service contract with the sixth largest educational institution in the United States, the Texas A&M University. The multi-sector service provision model allows for individuality, diversity, creativity and