The horsemeat scandal has seen a lot of finger pointing, but Iceland's chief executive raised the bar on Sunday when he suggested that it is councils and caterers that are to blame for driving down food quality.

Malcolm Walker told the BBC: 'If we're going to blame somebody, let's start with local authorities, because there's a whole side to this industry which is invisible – that's the catering industry. Schools, hospitals; it's massive business for cheap food and local authorities award contracts based purely on one thing – price.'

While public procurement contracts can offer long-term security, they are often based on high volumes and low margins, especially in a time of austerity. And Walker isn't the first to have criticised the system: there are claims the system has become 'fragmented' and allows for 'wildly differing' standards in food across the public sector, with budgets being squeezed and procurement teams under pressure to secure short-term cuts rather than long-term solutions.

So, with prices fluctuating and a race to the lowest price, has this made the public and foodservice sectors a dangerous arena in which to play? Is there a bias towards the lowest price and where has this left the government's own agenda to put healthy, sustainable meals on plates?

The coalition government arrived in 2010 with a promise: to become the 'greenest government ever'. There were high hopes that public food procurement would be a part of this revolution, putting healthy, sustainable and fairly traded produce on the plates of everyone from soldiers to hospital patients and Whitehall mandarins. In opposition, the Conservatives had brought together a taskforce led by Zac Goldsmith, the environmental campaigner turned MP, to investigate how the quality and sustainability of food served throughout the public sector could be 'greatly improved'.

Their recommendations included, at the basic level, all main meals to contain fruit and/or vegetables, while at higher levels the use of fresh produce rather than processed goods. The new code would, in theory, 'nudge' 'the millions of people who consume public food each day towards healthier, more sustainable choices' – so good news for fresh produce.

Critically, with crippling national debt, there was also evidence to support the cost savings. This came from 2006, when the National Audit Office (NAO) had calculated that £224 million could be saved through 'smarter' food procurement. However, the Labour government was accused of ignoring the issue, which led to Goldsmith's taskforce proposing a new 'Code for Sustainable Food in Public Procurement'. That never saw the light of day but, in 2011, a watered-down version of the code was announced. The new Government Buying Standards (GBS) would require a third of public sector institutions – including central government departments, prisons and parts of the armed forces – to only buy food which meets a number of nutritional, environmental and ethical standards. This included the pricing of fruit as cheaper than other desserts.

It wasn't quite what the likes of campaign group Sustain had wanted, but it was a step in that direction. That is, until it emerged how the lead department, DEFRA, was failing to meet the standards it had designed and there was little sign of any other department having published progress either. Two years on, there remains little or no information publicly available on the GBS (apart from hidden away in the appendices of various 'greening government' documents on the DEFRA website). If this was a scheme that was working, would it not be on the front page?

'It's a fragmented system,' says Sustain's Alex Jackson, 'whereby public sector organisations are buying wildly different food, to wildly different standards and at wildly different prices [between 86p and £7.44 per meal according to NHS figures last year]. And the caterers will tell you that also doesn't allow them to create the economies of scale.'

Indeed, in the 2010 taskforce report, Compass said the following in support of mandatory codes of practice: 'To see change, procurers need to be mandated to adhere to national standards. Change will require clear mandatory standards, and this will ultimately bring price down through economies of scale. While the approach to procurement remains voluntary, change will not be made as buyers will focus on the impact on the bottom line. There needs to be a common set of standards, which include nutrition, local and sustainability.'

Some caterers and foodservice companies are working hard to introduce healthier, more sustainable menus, but it's not always easy. 'We would love to go into schools and say you need to serve ['X' amount] of fruit and veg but all we can do is support and inspire,' says 3663 national accounts marketing manager Philippa Norton. The food distributor has just introduced brochures with '5 A DAY' recipes and is 'trying to get more fruit and veg into children's diets'.

Though not mandatory for schools and hospitals, Norton believes interest in the GBS is rising. Others agree. Anne Bull, chair at the Local Authority Caterers Association says there are 'plenty of targets' that its members have to meet but the GBS, albeit an additional set of requirements, are 'starting to filter through'.

Others argue that for many public procurement is just a race to the bottom price. 'From our experience, tenders are 50 to 70 per cent based on price,' says David Cox, general director at catering supplier Supply Direct. 'I think that sometimes the emphasis does sit more on price than it should.'

This can make supplying the public sector a difficult balancing act: this is often a high-volume, low-margin game and with fresh produce prone to price fluctuations suppliers need to 'box clever' in terms of ingredients and menus, says Cox. Broccoli and cauliflower are cases in point, with prices rising recently. Potatoes are another: in 2011 there was good supply, good quality and low prices, but that all changed last year with national production down 25 per cent to 1976 levels, problems with quality and prices doubling. Many tenders have 'price variation mechanisms' built in, which allows for reviews of pricing in extenuating circumstances. However, it's not unusual for the fixed-price period to be 12 months, so suppliers have to 'hedge' the price to allow for fluctuations. Doing so in the current climate is not easy.

Of course, there is a role for the procurement teams as well as caterers and suppliers to ensure the lowest figure does not prove a distraction. Within the NAO's proposed £224m savings, for example, were improved market knowledge and buying professionalism (£40m) and rigorous oversight of contract catering charges (£30m). Increased uptake of meals would also save a further £33m.

In Havering, which is part of the Soil Association's Food for Life scheme, the popularity of school meals is on the rise. Catering manager Gerry Clinton was in Lincolnshire last week talking to a supplier about organic carrots and he's hoping to do business if the quality and volume is there, 'and the price is right'.

Clinton admits that he pays a few more pence for organic and local where possible, or to produce more innovative meals that are non-meat based, but as the popularity of what he offers grows, so will the economies of scale. While Havering is the exception rather than the rule, other councils are looking seriously at more sustainable procurement – and reaping the rewards. Across in Richmond school meal uptake is up 45 per cent.

Zac Goldsmith is currently the MP for Richmond Park. Last week he was in Parliament stressing his message in a debate on the horsemeat scandal. Afterwards, he told FPJ that the door is open again to debate sustainable public procurement: 'It is such an obviously beneficial policy to pursue, and such an easy win for the government. I hope and expect we will succeed eventually.' —