Facility Management Outsourcing: More Barriers to a Good Relationship

By Vince Elliott  
OTHER PARTS OF THIS ARTICLEPt. 1: Outsourcing Facility Services Can Bring Strategic Advantages Pt. 2: Facility Service Outsourcing May Reduce Costs, Bring Other Tactical GainsPt. 3: Seven Reasons That Traditional Facility Services Outsourcing Is Not SuccessfulPt. 4: Facility Service Outsourcing Problems Start with Lack of Common InterestsPt. 5: This Page

There are other barriers to a good facility management outsourcing relationship between the buyer and the contractor.

5. Contractors don't actually bid the "spec." Often contractors cannot actually bid the "spec"; they bid price. If contractors submit pricing in direct response to the exact task/frequency "specification," it is unlikely that they will win the contract. Most contractors will acknowledge that if they were to fulfill every task as required by the contract, the labor and other cost would make their bid unacceptably high. Thus, every contractor is forced to "adjust" its bid to balance what is required against what can be delivered at a winning price. It is no surprise that management of these contracts becomes a cat and mouse game, where the contractor can only respond to problems discovered by the facility manager. In short, very few contractors can successfully bid the documented specification and few, if any, facility managers actually manage traditional contract "specifications."

The real bidding secret: Get the business at any price; figure out how to do it later.

6. Measurement of performance is unreliable. Facility managers have little time to measure reliably and they don't always accept the contractor's numbers. Unreliable measurement is compounded by a focus on problems and responses, after problems are evident. Traditional facility management outsourcing is measured by price, complaints and service failure. When there are lots of complaints, everyone says the contractor is unresponsive. If there are no complaints, does it really mean that the contractor is doing a good job? Traditional measurement is rarely focused on supporting a prevention strategy for facility service failure or a reward strategy for service success. And it often fails to link contract performance to company strategic goals.

Facility managers should realize that measuring to fix problems is a waste of time. Measuring to fix the system to prevent the problem is what works.

7. Short-term goals are sought. In the short term, operational cost reduction can support organizational transition and meet the cash need for acquisition or expansion. Yet this traditional outsourcing goal often misses the point about what success means. No business is founded on the idea of reducing operating costs as an end in itself. A company could cut 100 percent of its expenses by closing the business. The fundamental purpose of savings must be connected with the company's mission, its vision, its customers and its plans for the future. "Hurry up and save money" is a battle cry heard too often. And it is a classic error when savings are not clearly linked to the overall company strategic plan and its competitive position in the market place.

In the long term, dramatic cost reduction can undermine the ability of the company to remain competitive. The cost of low productivity due to low morale, lost tenants and the general replacement of neglected, worn surfaces at some point becomes unacceptable. Then it's payback time. What has been lost is the cost-benefit value that should counterbalance the reduce-cost-only strategy for outsourcing.

Facility managers are finding that traditional outsourcing is not a guarantee of success. Many are looking for a better way of contracting for facility support services. The current system of contracting just does not feel healthy to the facility manager or to many contractors. Click here to learn about the use of a performance-based contract as a reflection of a new kind of outsourcing.

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  posted on 10/30/2012   Article Use Policy

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