Management Insight: Maintenance Solutions Columnist

Part 1: Ten Reasons for Outsourcing Failure

Part 2: Guidelines for Outsourcing Contracts

Part 3: How to Measure a Contractor's Performance

Ten Reasons for Outsourcing Failure

By Michael Cowley - June 2010

Directly or indirectly, all of us in the facility maintenance and management profession have experience with outsourcing. Many have found great success with outsourcing endeavors, but even more have found problems — even serious failures — with outsourcing contracts and contractors.

Even after all these years of turning over work to contractors, outsourcing maintenance and engineering duties in institutional and commercial facilities is still a small percentage of the total work departments perform. Organizations tend to travel down the maintenance outsourcing path when their existing maintenance departments fail them or appear incapable of keeping the facilities in service, or when labor problems become unbearable to the management team and owners.

Outsourcing can be an effective tool to help managers and organizations make progress toward productivity and effectiveness, but outsourcing is not always a less-expensive or even successful alternative. And there is one common mistake managers make most often that is fatal to the process.

Signs of Trouble

Over the years, I've been on both sides of the outsourcing coin. I've been on the customer side and for many years on the contractor side, with successes and failures in both roles. Outsourcing can fail for a number of reasons. The most common ones involve:

hiring the wrong contractor
setting unrealistic goals
inadequate contract details
inflexible contracts
having limited or poor understanding of expectations
failing to use a statement of work or scope of work
failing to have a method for price adjustments or incentivized pay
inadequate management review
poor project and contract management by the manager and contractor
failing to understand scope or statement of work before bidding or contract negotiations.

Any of these problems can ruin the relationship between the contractor and the manager and lead to outsourcing failure. Good outsourcing contractors perform an autopsy after the death of an outsourcing contract to determine the reasons it failed and steps the parties involved can take to prevent future problems.

But here is the single most common cause of outsourcing failure: Building owners and managers fail to understand the existing scope of work and do not offer a vision for measurable maintenance performance.

It might seem difficult to believe that most managers or owners are clueless about the details of the scope or statement of work for the existing job or workers, but it's true. Then they hire a contractor to do the work and expect that company to understand the organization's needs or wants, based only on a one-hour bid meeting and a ten-page document.

Comments

dpb wrote re: Ten Reasons for Outsourcing Failure
on 11/25/2010 11:21:02 AM

Hi,

Most of the reasons noted for out sourcing failures are correct. There are a few that could be added, but there's one group of criteria that's significant. It comes down to the people that control the contracts do not have a thorough understanding of FM, contract management, HR and building maintenance/operational needs.

I too have worked in the "in-house" and out-sauced theatres for large FM companies in Canada and the UK. It's been very obvious that the clients senior and middle managers struggle with overseeing third party agreements and generally do not understand how the service provider should conduct their business. This can lead to costly over runs or major equipment failures to life safety or critical environments (data centres, telecom, etc.). Having seen these situations first hand and been given the dubious responsibility for sorting through the bubble of failure one can see clearly where the catalyst for the failure started.

DB