Seven Reasons That Traditional Facility Services Outsourcing Is Not Successful
The track record for many facility managers suggests that the traditional facility services outsourcing process is not fully successful in delivering on its promise to serve buyer strategic and tactical business goals. Surveys have reported that one in four outsourced services is brought back in-house within the first two years. Further, nearly 50 percent of those managing the outsourced contract are unhappy with performance, but are unable to correct the situation. In short, many facility managers have come to believe that traditional outsourcing strategies aren't fully keeping up with their needs. Some comments we have heard are:
"We (the buyer) assume all the performance risks."
"Contractors do not actually 'bid' the task/frequency specification; they bid price."
"No one actually manages the task/frequency specification; we manage complaints."
"The traditional contract has no accountability tied to our strategic goals."
"Our goals and contractor goals are in conflict. It's a win-lose relationship."
"Cleaning services are a commodity — they're all alike."
"Our contractor selection process is dominated by the bid price."
"Traditional contracts offer poor performance measurement opportunities."
"We have little time to measure performance and don't always trust the contractor's numbers."
"Responses to poor contractor performance are limited. ('beat-up' the contractor or fire them)."
"Why does cost reduction always means performance reduction?"
"Contracting companies trade each other's buildings every few years and nothing changes."
A number of shortcomings in the traditional facility services outsourcing model are creating this emerging business failure. These shortcomings include issues like:
- Buyer-specifies the work process.
- It's a "what's in it for me" relationship
- Contractor selection is price-driven.
- There are no consequences for poor performance.
- Contractors often don't actually bid the "spec".
- Measurement of performance is unreliable.
- Everyone is focused on short-term goals.
Each of these problems contributes to a deficit in the ability of traditional facility services outsourcing to be a fully successful buying strategy. The discussion that follows highlights these deficits in greater detail.
1. Buyer specifies the work process. In many outsourcing contracts, the facility manager specifies how the work is to be done versus what result the work is to produce. These are "process" specifications that list the variety of tasks to be performed, at a required frequency. This means that the facility manager selects the contractor based on its performance and achievements, then tells them "don't do any of your best practices; I've written it all down for you, so do it my way." And, if following the facility manager's tasks/frequencies delivers a dirty facility and customer complaints, which party is at fault, the contractor or the facility manager? After all, it's the facility manager's process that the contractor is legally required to follow. Buying time, tasks, processes, labor hours, systems, etc., has little value if they do not produce an advantage for the buyer. An expensive trap can be created when facility managers are specifying the work process around what people do, versus what resulting benefit the company gets.
What's more, the more the facility manager requires and manages its own process for doing the work, the more likely a co-employment relationship will exist.