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Managers Discuss Benefits and Drawbacks of Contract Maintenance

By Dan Hounsell, Editor - February 2012 - Maintenance & Operations


*David Cooper, Director of Facility Operations, Las Vegas Convention & Visitors Bureau

*Patrick Pizzo,, Director of Facilities and Operations, East Meadow (N.Y.) Union Free School District

Budget-conscious maintenance and engineering managers frequently face one issue that combines financial and emotional components: outsourcing. The decision on whether to call in contractors to perform maintenance tasks often means managers must weigh the bottom-line benefits of the strategy with its potential impact on in-house staff.

Q. In general, why have you chosen to outsource maintenance and engineering duties?

Cooper: One factor is if we felt the task was above the scope of our abilities or if it was something that was very technical, or if there was a residual benefit. Here's an example: If we outsourced the monthly and annual maintenance on our chillers, we got an extended warranty on that equipment. If we allowed the manufacturer or the installer to do the monthly service, then we got a two-year extension on our warranty period at no cost.

Pizzo: State reporting requirements, licensing requirements, and jobs that were too large for in-house staff to handle effectively. Also, purchasing and maintaining large equipment, for tasks not often completed, is cost-prohibitive. For example, grounds equipment to aerate fields, buying and maintaining large cement mixers, and car lifts.

Q. What tasks does your department now outsource?

Cooper: We outsource our water treatment — for water testing, we still test it on regular intervals, but our water treatment is outsourced — chiller maintenance, any concrete or core drilling. Any thermal imaging of our electrical panels, that's outsourced. We have a triple-A baseball stadium, and we outsource just the stadium cleaning portion because it's extremely seasonal. We used to outsource our theater maintenance, the lighting fixtures and stuff like that, but we brought those operations back in house. We have electricians on site, and with a little bit of training, we could get an immediate response. We're staffed here 16 hours a day, so if there were just a few lights out, we didn't have to call. It was more to decrease that response time. That was a customer-service thing. So if a light went out during a rehearsal, it was a 10-minute response instead of an hour or a couple of hours or the next day.

Pizzo: All capital work, boiler repair, some auxiliary heating plant equipment repair, auditorium light and sound repair, most site work, most car and equipment repair, and organic lawn treatments and aeration. We do complete in-house training to minimize the work we outsource, which limits our need to outsource, providing an effective option when estimates exceed what we had anticipated.

Q. Have you generally been satisfied with the results of outsourcing?

Pizzo: Yes, where there have been concerns, we switched to more effective vendors or trained in-house staff to complete task where appropriate. Evaluating options prior to outsourcing, via a cost-benefit analysis, helps establish a clear goal by which outsourced work is evaluated. If we have a contractor who doesn't perform up to our standards, they're not going to be doing work with us anymore. We have other options.

Cooper: Overall, I'd say yes. It has freed up our guys to work more toward improving reliability for our operations. It was more for customer-service orientation in our engineering department, where they're responding to almost any customer concern or request. We can respond to that now, as opposed to before, when they were out doing one of those tasks that we've outsourced.

Q. Do you have an example of an outsourced project that worked especially well?

Cooper: Our chiller maintenance. Not only have we relied on (the contractor) for our chiller maintenance. We've also added additional tasks for them to assist us — recommendations for load shedding and energy monitoring for our HVAC systems. We've reduced our energy costs 35 percent a year since they started doing that, which is pretty significant. That's probably about $125,000 a year for two years now.

Pizzo: We have had success with performance bonds. Anytime an outside resource can quantify a savings, an effective district will evaluate options presented. There are companies that specialize in efficient green solutions, which should be examined where applicable. In New York with performance bonds, you're justifying the cost of the outlay by showing that savings will be able to pay for the work done over an 18-and-a-half-year period. That's part of our evaluation process. So if you have a company that comes to you and says, "We can replace all the lights in your school" — which is an actual example of a project we've done under a performance bond — if you can justify that payback, it'll be cost-neutral. So anytime you can upgrade your plant and have it be cost-neutral, that's something in this economy that you have to consider. You should always consider it, but this economy makes it even more important consideration.

Q. What steps did you take to ensure the contractor performed these duties to your expectations?

Pizzo: Personal inspections, input from building leaders, and feedback from stakeholders at all levels. People need to see the director of facilities out on the job site watching what's going on. Obviously, I can't be there throughout every aspect of the job, but they need to know who I am when I show up, that I'm there getting a first-hand analysis. I also have principals, building leaders who are the end user of whatever project we complete. If a phone call comes through from a principal, that's something that needs to be part of your evaluation. If you don't get that call, you need to make that call to them to see if there's something they've identified but haven't taken the time to call you yet.

Cooper: We have built-in performance measures. We also have service windows. For example, we know they're coming out the last weekend of the month. We know they're coming out the last week of the month, somewhere between that Monday and that Friday. So if gets to be Thursday afternoon, and they haven't shown up, we'll call to make sure they know tomorrow is their day to be out to provide us with that service. We also rely a lot on our supervisors to help build those (requirements). It's very clear so our end users, our supervisors, our HVAC techs are right there ensuring every step is completed. We ensure they come out when we are staffed so that we can have a dedicated HVAC person with their technicians while they're on site.

Q. What has been the impact of outsourcing on in-house staff?

Cooper: We don't look at it as a tool to downsize. We've wanted to maintain our current staffing levels. We did it more or less to prolong the life cycle of the system. We've shortened the interval between our preventive maintenance cycles. So maybe where we would have PMed air handlers semi-annually, now we're doing them quarterly. We've filled that time that we've outsourced, and we've added tasks for in-house staff to keep their work level the same. We have a couple of HVAC techs who were (manufacturer) technicians prior to working here, and they certainly felt they were capable of doing it. Obviously, when you outsource, there is the issue of job security. But when they saw we were increasing our in-house maintenance process and shortening the intervals between our PMs, that kept up their workloads, and there's been no decrease in morale.

Pizzo: It seems to me like there's resistance in other districts. In my district, by the way we handle things, that's not the case. We don't bring contractors in and push our in-house staff off to the side. I want them to constantly learn and develop. I send people to training in different trades for licenses that are required. If there's an interest and an employee with talent, we'll develop that to our benefit and theirs, as well. When you bring in outside contractors, as long as they're looked at as a component to help (move) their building forward, and it's not something we can do in-house, I think you're going to get support on that. For the people who are kind of ruffled because they think they could have complete the task, it's a motivator.

Q. What lessons did you learn from the outsourcing process?

Pizzo: Ultimately, if you don't have someone who is going to hold people accountable, both in-house staff and outside contractors, that's when the animosity comes in, and you have the discontent of the in-house staff. Outside contractors will take liberties. The reason that's so important is that's the way you get a reputation with your in-house people for consistency, and that reputation also can be established and maintained with outside vendors. If there's a vendor who doesn't do an effective outside job, and they know they don't do an effective job, they're not going to come looking for work in my district because they know I'll hold them accountable.




Roundtable: Outsourcing

Part 1: Managers Discuss Benefits and Drawbacks of Contract Maintenance


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