Entering into an FM arrangement can generate cost reductions of 15-30 per cent over a period of 3-5 years, but to deliver this level of saving without a corresponding drop in quality requires meticulous assessment, detailed planning and faultless execution.
Against this backdrop, it is expected that growth of FM outsourcing will accelerate in the coming years. This upward trend is the result of the customer recognising that in an increasingly competitive environment, it is important for companies to focus their time and energy on strengthening and developing their core business. For many businesses, the thought of outsourcing their 'internal' or 'back room' services, other than perhaps pest control and window cleaning, remains a novel idea that is only just starting to catch on as the phrases "facilities management" and/or "facilities services" find a place in business vocabulary.
But just as the phrases start to gain recognition, so does the bewildering range of options open to the unwary. Services can be provided singly, or in bundles, integrated or even fully integrated! Each has both real advantages and risks.
Single servicesFor over 30 years, some companies have contracted out cleaning, security, staff catering, janitorial and landscaping activities, regarding them as rather un-complex services to be bought in from specialist suppliers. In general, they were considered non-critical to the overall performance of the organisation.
By the 1980s, this concept was expanded to involve more complex areas closer to the core business of the customer - but invariably they would be treated as single elements and contracts let accordingly. As a result, providers tended to specialise in their own product (for example, Gardner Merchant was a big name in catering and ISS was building a reputation in cleaning), but by and large they did not venture into the unknown.
Today, the list of services has grown massively to reflect the demands placed on space. Organisations still need the traditional services, but also buy-in CAFM, procurement, change management and other increasingly sophisticated support.
The drawback to this approach, and it has always been so, is that important economies of scale can be missed. It can also become complex and time-consuming to manage a large number of contracts when multiple services are being purchased.
That said, on the upside, the providers can deliver efficiencies or added value through their focus to particular issues.
Bundled servicesLike bread and butter, some services have a natural affinity. Take security and car park management. It is an obvious progression from acquiring single services to buying bundles of services where there is a degree of commonality.
Catering and cleaning were obvious partners to some, but whilst they have benefited from some economy of scale, they still fail to deliver the full range of opportunity that can be achieved by a shared vision.
It is very unusual for a supplier of a single or bundled service to be asked to, or even consider, the element of risk surrounding the service when looked at from the client's point of view. Because of this, the cost of risk has traditionally been excluded from any contractual costs and remains with the customer, which has meant that they have relieved themselves of the hassle of providing the service but not the responsibility for its safe and effective delivery.
So, while bundled services can unlock efficiency, both in delivery and contract management, they are still not really integrated into the needs of the client business, creating a further degree of risk.
Integrated servicesThe facilities services market is highly competitive. The existing competition may have come from a catering, cleaning or building services background, but each established company has effectively evolved from a core service and developed wider expertise.
As these companies have grown in confidence in delivering multi services, so have the ways that the approach is marketed. There is a plethora of different models currently on offer but all appear to be based around two principal methodologies.
The first is the conventional concept, where an FM company manages all the relevant services on behalf of a client company, but will sub-contract the delivery of services to a number of specific experts, based upon the principle that a bespoke provider will bring a better service offering than a generalist.
At this level of engagement, the FM partner will work hard to understand the needs of the client and perhaps even share performance targets based on its objectives. This type of arrangement is contractually and operationally more complex to set up, so that agreements will typically be longer.
This has been highly successful even though there can remain an element of doubt as to where the final responsibility should rest - should it be the provider, the FM agent or the client? It can also be difficult to align a group of companies, each with their own needs and aspirations, with the objectives of the host organisation. That said, it can work very well.
Fully integrated servicesThe second model is a fully integrated approach, whereby the service provider directly provides (i.e. manages and delivers) all services on behalf of the client company. This option provides a single and flat management solution that can directly employ all staff and take full responsibility to meet the specification dictated by the client.
This single line management approach is then supported by centres of excellence providing the single service technical support, but with a common aim of delivering 'best in class' services to the client.
Such agreements clearly require a very careful procurement process, as it can prove difficult to find a sole provider with strengths in all the required areas. Additionally, these contracts require a great deal of upfront work, both in terms of planning and legal aspects, although they can offer much simpler ongoing management.
We believe that the ideal model for facilities services is hotel service delivery, where operations are backed by a corporate culture focused on customer service, people motivation and predictable service outcomes. In short, the objective is to use management expertise to deliver an 'in-house' level of service and ownership with outsourced efficiency.
Moving to a fully integrated service from the traditional single service offerings means a step change in thinking, not only for the suppliers but for the clients as well. Facilities services managers now have to have a broader scope of experience, or at least know when to call upon independent, professional advice.
There also has to be fundamental commitment to training and offering staff development. The integration of services offers unique opportunities for the introduction of modern equipment and technology, whilst ever-changing legislation affecting so many of the traditional services also brings with it the challenge of developing and motivating the workforce.
That being said there has never been a better environment for FM and facility services to flourish.
Andrew Price is Managing Director of the Integrated Facility Services Division at ISS UK. Visit www.uk.issworld.com/view.asp?ID=1275
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