(First published in Supply Management magazine, October 2002)
Buying Facilities Management should be a simple task. But the difficulties facing in understanding the complex supply market, combined with the problems of specifying the services and technical disciplines encompassed by FM, makes procurement of it challenging.
Problems in the FM market include the adoption of the “FM” tag by companies who supply services (cleaning, for example) rather than management; constant turmoil in the ownership and management of FM companies; and a consistent problem in obtaining clarity of pricing and service outputs from the market.
This is irritating for buyers, not least because, properly structured, outsourced FM has much to offer. But the market seems almost wilfully determined to stop buyers getting the best out of it.
This may merely be one sign of an immature market place. There is no clear market leader in FM service provision, and because a large proportion of management is retained in-house there is a constant debate about whether out-sourcing has a future. This erodes buyer confidence, as does the frequently poor delivery of services. In a market where excellence is the exception rather than the rule, the onus for ensuring quality falls very heavily on clients.
But outsourcing of FM is not without merit. In many situations, organisations would be better off seeking externally provided support for FM. To assess this, consider three main criteria that should be satisfied before you outsource.
Those criteria are:
If these criteria are not met, then you run the risk of paying more, getting less, and losing control of your corporate infrastructure.
Even if you meet these criteria, the client has to take steps to provide safeguards of service quality, because you cannot rely on the contractor to do so.
One mistake organisations made when outsourcing for the first time was to lose their in-house management team to the contractor, by transferring them under TUPE. You must retain a small team with the commercial and technical credibility to manage the contractual relationship. You must have someone to represent your interests, take a long term view, advise on future options, and manage supplier performance over the life of the contract, as well as oversee contract renewal and development of the services.
Clients also have to specify the services required. This is notoriously difficult, and is not helped by the absence of any industry standards. Clients need a format which sets out qualitative requirements, combining outputs, measurable results, and key inputs.
Clients, too, make mistakes. It is rare that organisations adequately document in-house standards, so over-specifying is a big risk. Often, specifications are a wish list of outputs which bear no relation to current performance. This may result in the contractor having to improve the service from a low starting point without adequate resources or time. It can also increase costs beyond the means of the client organisation. You need to specify “fit for purpose” service requirements just as you would with any other purchase.
It is also often the case that clients don’t know the true cost of current services – costs are hidden, delegated or not reported accurately. Outsourcing exposes this. A revelation of additional costs after tendering may make savings impossible to gain. This will create conflict where a share of savings is an incentive to the contractor.
Outsourcing FM is fraught with problems. None are insurmountable, but client management should understand that what looks like a panacea for service problems will only produce maximum impact with time and effort. Procuring FM services may not be simple, but it can provide substantial corporate benefits.
© Dave Wilson, 2002