Facility Service Outsourcing Problems Start with Lack of Common Interests

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: This PagePt. 5: Facility Management Outsourcing: More Barriers to a Good Relationship

2. It's a WIIFM-L (What's In It For Me-Lately) relationship. Many facility service outsourcing problems can be traced a situation where the two parties really don't have common interest. Where everyone is looking out for their own best interest, the more one party is successful, the less the other party is successful. This negotiation is a classic win-lose dilemma. There is no contractual focus on the buyer's mission and their competitive goals. And there is no mutuality of consequences linking buyer success to contractor success or failure. Remember to pay attention to WIIFM-L (What's In It For Me-Lately)? What does each party want to achieve? The buyer wants a "quality" product or service, no customer complaints, responsiveness and below-market pricing as a strategy for maintaining or increasing their market share. The contractor wants healthier profit margins, increased revenues and long term relationships as a strategy for maintaining or increasing their market share. Despite all the talk about partnering, the traditional buying strategy is an everyone-for-themselves-relationship, where success is measured by how much compromise is accepted by each party.

3. Contractor selection is price-driven. In this sort of ever-person-for-themselves environment, the facility manager often says that price is not the main criteria for awarding a service contract. Facility managers talk about partnering, they talk about performance, they talk about alliances, etc. Yet in the end, the three things that drive buyer selection of contractors are price, price and price. Sometimes the facility manager (or the facility manager's agent) is too motivated by the goal of dramatic cost reduction. When the facility manager participates in a "savings bonus" program, short-term greed can cloud long term outsourcing success. This is most likely to occur when the company is unclear about the balance of value it expects at any savings level. Contractors understand when price is the driver; and they low-bid (usually under-bid) the job in response. Downstream prices increases are a natural consequence of this strategy.

4. There are no consequences for poor performance. Traditional outsourcing fails to link consequences to performance, except the implied ability to "fire" the contractor or talk them to death as a strategy to improve performance. Since the traditional contract is based on a process "specification," it creates a contract obligation to adhere to a constant set of tasks and frequencies defined by the facility manager, despite changing environmental, soiling or service demands. This means, by definition, that the facility will be both under- and over-serviced on a regular basis. The contractor gets paid the same whether or not the facility manager is satisfied, delighted or desperate. The facility manager assumes all the risks. The failure to establish performance accountability undermines a healthy buyer-contractor relationship. Thus, getting things done becomes a relationship dance, and each party thinks it is leading. Sometimes it works; sometimes it does not. Either way, performance results tend to be inconsistent, and the contractor has no operational incentive to change their own systems. Facility managers are left to ask themselves: "I can beat them up, I can fire them and I can even be a friend. Why can't I get my building cleaned?"

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  posted on 10/30/2012   Article Use Policy

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