Rant: The Department of In-House Hospitality

by The Editor

Blend 43

Office perks: Customs’ $9K coffee machine spend

…screamed The Canberra Times’ headline yesterday (Monday 18 March 2013), taking a well-earned break from putting the boot into the Centenary. ERMAGHERD!!! How could such a thing be justified?

Well, the fact Customs spent all this money to entertain guests – especially when they are located in the middle of nowhere in rural Victoria (yes, even further than Brindabella Park) – in a day where a couple of scoops from the 5kg Blend 43 tin probably no longer cuts it, is hardly a sensation… is it?

What was interesting, was a link further down the page concerning the Department of Resources, Energy and Tourism spending over $100,000 over three years to keeps beans up to a collection of in-house coffee machines a stone’s throw from at least half a dozen coffee shops. The maths roughly pan out like this:

Nine machines purchased in 2009 for $7,000 each = $63,000
Maintenance on said machines of $2,000 over three years = $18,000
Coffee beans to supply said purchased and serviced machines over three years = $37,000

Here is Senator Busby’s statement following the last Senate Estimates’ Questions on Notice.

Given Labor’s promise to rein in spending and exercise fiscal restraint I would’ve thought one of the first savings measures would’ve been swapping the taxpayer-funded macchiato, latte or mocha for a tin of instant blend and a kettle.

Mingle Cup

What the???

As Senator Bushby has proved, it’s easy to get outraged at this. Why on earth buy for people what they are more than willing to pay for themselves? In these times of public service cuts and federal budget blowouts, how can a department possibly justify such frivolous expenditures? Well, quite easily, it appears.

With a bit of digging, it might appear the upper-management of DRET is a little more savvy than we may expect.

Let’s run some numbers. We decided to execute a highly unscientific research program to determine the average time taken to leave the desk, walk to the coffee shop, procure a latte and return to one’s workstation.  Once a sample pool of two had been established, we came up with an average of 20 minutes per trip.  For the purpose of this discussion, we think that may be about right.

The average coked-up, mansion-dwelling lower-management public service earns around $100,000 per year. Sticking to rough, round numbers, that works out at around $2,000 per week – $400 per day – $50 per hour.  With that in mind, our little sortie to the coffee shop is worth about $17 in wages.

Time for some more rough numbers. Beans, when purchased in bulk cost around $20 a kilo (less for very busy cafes). Each kilo, for an efficient machine should produce 60 – 70 shots of coffee.  Some people will have doubles, so let’s take a conservative estimate of 50 coffees from that kilo of beans.

At $20 per kilo (possibly cheaper) DRET purchased around 1,850 kilos of coffee for their staff. Using our 50 customers per kilo ‘guesstimate’, that’s around 92,500 coffees for their 400 staff. Taking a conservative approach once more, let’s assume the in-house coffee knocks 10 minutes off a coffee run (waiting for lifts, walking and queuing). That number represents a saving of $8.50 in wages, but importantly, the opportunity of a convenient and free coffee presents a $3.50 saving to the employee, therefore minimising lost time for the employer. Sure, some people will have a coffee because it’s free and handy when perhaps a long and costly walk may dissuade them. Let’s factor that in for 25%, allowing the majority of consumers to be assigned as regular, die-hard addicts. What’s our ledger looking like now?

$8.50 (wages) x 92,500 coffees (from beans) gives us a total saving of $786,250 for lost time. Knock of 25% for opportunistic consumption, and add in the cost of the machines, service and beans ($125,000-ish) and we’ve still got almost $590,000 in the kitty as a result. Remove the sunk cost of the machines and the numbers look even better. Even though those numbers are rubbery – and a town filled with economists might certainly provide a more accurate result – if we’re out by as much as 25%, DRET’s strategy looks effective.

Not bad, huh? This shows the sort of dynamic thinking departments should be encouraged to utilise. In fact, Fortune 500 companies have been doing this for years. However, as demonstrated by the hysterical rhetoric of a Tasmanian Senator, sometimes it’s a little difficult to explain.

Feel free to throw your own economic analysis of this highly-pressing issue below. We’d be fascinated to see what you come up with.