The privatization of the Israeli Defense Forces food supply

1. The privatization of the Israeli Defense Forces food supply Project status and implementation methods 31 May 2004 מנהל ההרכשה והייצור

2. Agenda 14:00–14:30 Assembly Opening statements – Mr Itzhak Bloch, Deputy Director of Logistic Support Group Brigadier General Yakov Nakash Introduction to main features of the project Lieutenant Colonel Miriam Amiel -food division Q&A panel 14:30-15:00 15:00-15:30 15:30-16:30

3. The defense department sees a pivotal role for the private sector to guide the project • The defense department allows suppliers to state their opinions and influence the project in many ways: • Answering questionnaires that will be handed out during the conference • Q&A session during the conference • Contact references within the defense department We would like to thank you for attending this conference and hope that you will continue to express interest in the future

4. Food supply project – status report • The privatization of the entire food supply chain in the IDF (about 150,000 meals/day) • Division of the project into 2-3 suppliers (probably based on geographic areas) • The Ministry of Defense will not allow the construction of facilities on military grounds • Sales to additional consumers will be allowed • The Israeli police force will join the IDF as a consumer in the project (about 20,000 meals/day) • Tender will be issued during the course of 3Q/2004 • The operation period will range between 5-10 years All statements issued by the MOD during this conference are to be viewed as general guidelines and may change at future time and do not constitute any sort of obligation

5. Food supply project – project purposes Improving the quality of food services in the IDF Reducing IDF food costs Reducing managerial burdens

6. Food supply project – guidelines Comprehensive responsibility • Complete authority within well defined responsibilities Defining needed output • Defining outputs and not solutions Flexibility • Adapting to the changing needs of the IDF Expertise • maximizing professional expertise in all fields Supervision • Taking simple measures to supervise suppliers performance

7. Application of the project demands a wide array of capabilities in the food and logistic industries Purchasing of raw materials Production (cooking) Assembly and storage Distribution heating serving End kitchens and mess-halls – yet to be decided Supplier’s responsibilities

8. In addition,it requires the creation of assembly and distribution infrastructure as well as allocation of existing or new production ability • We estimate that the project will include an construction period in which: • suppliers will set up the needed infrastructure or/and contract with subcontractors • Assembly and distribution facilities will beestablished • Production technology including equipment for end kitchens will be purchased • Contact with American suppliers will be established if needed (FMF)

9. We estimate that a project of such character should be headed by a leading company in the food industry The contract may include the following optional items: • The supplier will be a SPC • A consortium which is led by large industrial food company • The involvement of a company with international experience in the food industry will serve as an advantage • Annual use of FMF (American dollars) obligations will serve as an advantage We believe that the project poses a challenge and and opportunity to both local and international leading food companies

10. The bidding process will be two phased: thresh-hold conditions and a grade formula Responding to tender No Yes Do you meet thresh-hold requirements? Bid review based on financial conditions, food experience in the industry and manufacturing capabilities Bid will be graded based on set parameters Disqualification Bid comparison between the highest graded offers

11. Price Nutritional properties (skeletal menu) Bid requirements will be based on the following parameters We are interested, as part of the bid process, in a testing stage in which the supplier will provide food to a single unit Consumer satisfaction Operational needs ( allowing units flexibility) It is expected that the private sector will achieve an optimal combination of the four parameters

12. We are considering 3 options to implement the project: To the base End kitchens Mess-halls Full operation Partial operation Operation without mess-halls Military operation Suppliers’ responsibility IDF responsibility Index The option to be chosen will be based on profitability * This option refers to situation in which the supplier will be in charge of end kitchen operation using soldiers

13. The defense department is considering two operation models Service Meal = one unit (several types of meals will be defined) Menu structure (based on the skeletal menu) – by the supplier in conjunction with the unit Compensation Compensation will be based on number of consumers Most probably the bid will include a compensation cap Supervision Quantity measures will be set to test critical parameters The bid will include set bonuses to ensure QoS * Not including military operating option - next slide

14. Operation – model B Measuring units will be based on courses/side dishes (a number of meals will be defined in accordance with units needs) Menu structure (based on the skeletal menu) – by the supplier; unit must approveand order Service Compensation Compensation will be based on food supplied to the unit Bonuses will provided based on additional services: operating end kitchens and mess-halls (consumers count) Supervision As in model A

15. Another critical issue is a viable solution to crises situation Possible crises • Bankruptcy by one or more suppliers • Destruction of production lines General opinion is that most of the needed products can be attained from various producers

16. The leading solutions will be based on the following: Operating the food supply during crises will be based on: Purchasing ability Sub contractors Backup Critical infrastructure Inventory The MOD will maintain a purchasing ability (independently or via large bulk buyers in the market) Contracts with large subcontractors will be converted to contracts with the MOD Each supplier will have to produce a supply and assembly line for all IDF needs Assembly and supply infrastructure will be seized by the defense department Emergency inventory for 14 days (basic menu) We believe that the availability to supply all of the IDF needs is possible by using sub contractors or existing infrastructure * If three suppliers will be chosen- each will be required to develop assembly and supply lines to cater to 50% more than the expected volume

17. Q&A • During this stage participants will be given the opportunity to pose question to MOD representative • The MOD guarantees that a full written response to all question will be supplied to all the conference participants • The written response will serve as a formal reply to each and every question (including questions that were answered during the conferences)