Outsourcing: Managers Discuss the Often-Controversial Practice
By Dave Lubach, Associate Editor - August 2013 - Outsourcing
Outsourcing can be a controversial practice in maintenance and engineering departments. But when used properly by managers, outsourcing can bring efficiency and savings to the operation of institutional and commercial facilities, and be a benefit to departments with ever-increasing workloads. In this roundtable, three managers address questions surrounding outsourcing and its impact on their departments and facilities.
How often have you outsourced maintenance and engineering tasks, and which tasks?
CLEMENTS: We routinely outsource some low-tech repetitive work, such as air filter changes, lawn care, replacement custodial staffing, and painting that we think contractors can do more cost-effectively. In other cases, we have contracts for supplemental services that can be used to augment in-house capabilities for workload management, such as on-call mechanical and electrical repairs that are priced on a time and materials basis.
MILLER: Primarily, what we've done is outsourced a lot of our regulatory inspections. A good example is fire-alarm testing and sprinkler certifications. We do have the staff in-house to perform some of those, but they are a regulatory requirement for us, and I feel more comfortable when we use a third party for those types of tasks and duties. Also, for maintenance and construction jobs, we've streamlined our workforce to a point where we want them to focus on maintenance items. It's hard for us with a smaller workforce to take a few mechanics and devote them to a small construction job.
NORRIS: I do have a few annual contracts on the maintenance side. Some of the bigger items, like chiller maintenance, we do have staff that works on air conditioning, changing belts, even swapping compressors out. The bigger equipment, such as breaking down a 400-ton chiller, we don't have the capacity in-house to do that.
How much have economic conditions impacted your decisions to outsource?
NORRIS: Tremendously. We're no different than anyone else. And sadly enough, at the end of the day, it boils down to what you can afford. We're forced to make decisions based on funding availability. Everybody's trying to accomplish more with less dollars.
MILLER: We're in a tough spot in the market spot these days trying to get full-time employees, so it depends on how you want to look at it. It's easier for me to outsource certain tasks or duties than it is to get a request for additional full-time employees. It helps me be a little more efficient. I may pay a little bit higher price short term, but in the long term, it's cheaper because I don't have to keep an employee on a full year.
What are the main challenges of working with an outsourcing provider?
MILLER: One is competency. With the economy now, you have a lot of people going after a lot of work, and not all of those people are qualified to do what they say they can. The biggest thing is to make sure you pre-screen, make sure the scope is clear, and really interview the contractor or the service you're hiring to be sure that they can do what you've asked them to do. I also ask them to provide copies of their licenses and some business information.
CLEMENTS: One challenge is that you lose some flexibility when you outsource a specified set of services. As an example, in-house filter changes could have been diverted from that task to serve as a HVAC mechanic helper if needed, but that does not happen when it is outsourced. We have addressed some of these flexibility challenges by having contractors provide time pricing and materials markup pricing as part of their bids so we can obtain limited amounts of additional services under an existing contract without going through a sometimes time-consuming procurement process.
NORRIS: I do like the flexibility that if they do not perform their task, if they are not providing the service, you just get rid of them.
What are the most difficult steps in the outsourcing process?
CLEMENTS: The most difficult and time-consuming process is writing the specifications of the desired services. We no longer have any contract or specification writers in our procurement department, so the responsibility to write the contract lies with the facilities staff. We have occasionally hired a technical professional to help write specifications for more technical requirements, such as water-treatment services. Searching the web for requests for bids and proposals is more and more fruitful as more organizations post complete bid documents online or at least post a brief description and contact information for the procurement office. I have found other organizations to be cooperative in sharing their documents.
MILLER: Sometimes the procurement process itself can slow things down, internal things, like if we are doing a job sizable enough where I need to put this company or service under contract for the work. Internally, we have protocol we have to follow to make sure that legal reviews everything, and that can slow things down.
How do you address potential morale issues and other in-house staff concerns related to outsourcing?
MILLER: I would say probably 10 years ago, the staff would sometimes get nervous about certain jobs that we would outsource because they would feel that these were tasks we could do. Over the last 10 years specifically, our workload from a maintenance standpoint has increased, so therefore our mechanics are much busier. Over the last 10 years, they don't mind it as much. They have a better understanding now that if we did pull those two or three mechanics for a specific job, it would increase their workload and put them behind on many tasks.
NORRIS: I haven't experienced any morale issues. Actually, it's worked out. The company we are contracting with currently, they've raised the bar for our own people. They've set the standard, so we kind of gauge what our in-house people do as opposed to what the outsourcing company does.
CLEMENTS: We work to anticipate outsourcing so that we can gap some positions or transfer people to other open positions if there is a skill match. For replacement custodial services, we budget based on 15 replacements from a pool of 500 custodians and serve it through a mix of in-house floaters and on-call temporary service workers. Having part of the needs met by contracted workers also allows us to better meet peak requirements.
What have been the biggest benefits of outsourcing for your department and organization?
NORRIS: Savings. Even a small school district like us, we have 10 campuses, a new three-year contract we signed on custodial services for two of our campuses is saving us $146,849.75 a year. That's also a conservative number. I can buy quite a number of air conditioners, light bulbs, and toilet paper with $150,000. I have looked at other avenues of outsourcing, like grounds maintenance. I've done some shopping on that, and in that particular category, it's just cheaper for us to do it in-house. I can't find a company to compete with us. It would cost us more.
CLEMENTS: The biggest advantages have been cost savings and getting done what you want without the resources being diverted once they are committed. For example, air filters get changed, and grass gets cut on a reliable basis. Another advantage is that outsourced services can flex resources when needed, such as pest control, when termites are swarming or fire ants are most active.
MILLER: Flexibility. Being able to get those services and tasks you need done, and you don't need to hire a full-time employee. You can get those services on-demand, when you need them, and then discontinue them when you don't need them anymore. So flexibility has been the biggest thing.
Part 1: Outsourcing: Managers Discuss the Often-Controversial Practice