27 February 2014
For some time the facilities management services industry has promoted the idea of longer relationships and closer integration with end customers.
The advantages, in theory, are admirable: closer working relationships with a better understanding of the client’s needs and greater freedom for the provider around how to deliver services, which should deliver genuine synergies and efficiencies.
The idea itself has been around for the past 20 years, says John Bowen, director of Gulfhaven consultancy and chair of the BIFM’s procurement special interest group.
He recalls working on behalf of a big corporate client that was trying to outsource service delivery across 27 sites. “They wanted to end up with a team of four or five people as the central client,” he says. “We got the M&E supplier to come to all of the team meetings so was really tightly integrated and we did the same with catering and the cleaning suppliers. It meant they understood our business much better, and could offer us things which were more suitable for us, rather than an arms-length relationship where you have them in once a quarter to beat them up.”
The prime drivers
Compass Group UK & Ireland recently launched 14forty – a new integrated FM business – after research suggested that clients are increasingly looking for bundled FM services delivered in an integrated fashion.
“The prime drivers are cost reduction, simplicity and convenience,” says managing director Steve Davies. “Historically, clients have procured three or four service lines and had three or four companies and managers; now they just want one person to deal with. I’m tending to see FM being integrated in a client organisation with corporate real estate management, and I want to get a seat at that table so that when a client is making strategic decisions about where their business is going, we’re there talking to them about how we can support them.”
Where relationships are truly integrated and providers are given greater freedom to run contracts in the way they believe is most efficient, it can give rise to involvement in other areas beyond those traditionally associated with FM, with potential benefits for both parties. Christopher Kehoe, group executive director of Emcor, gives the example of one customer in the pharmaceutical industry where a traditional FM relationship has evolved into helping with part of the product development cycle.
“We are hands-on with the product at various stages of its development,” he says. “We’re finding that where we’re getting this much better level of integration we’re much more able to voice our opinions on things that perhaps would have sat outside of FM in the past.”
Learning corporate culture
Davies, too, has seen a move into other areas. “A client recently asked us to look after their travel plan,” he says.
“My travel plan co-ordinator was able to map 3,000 people who work there, looking at where they live and where they travel from to get to work. As a result we have taken 50 cars off the road and they now put two 52-seater buses that collect people and bring them into work. Travel planning was never part of the tender process but it ticks so many boxes in terms of carbon footprint reduction.”
Yet there are limits to the degree to which two separate entities can be genuinely integrated, both in terms of operational boundaries and contractual or cultural ties.
The closer you get to a customer’s core products, the greater the potential risk for the client, says Kehoe. “One of the key considerations for clients is at what point does that risk of having an outsourced provider close to your core activities become either unmanageable or unacceptable,” he says. “It’s important that they retain control and that key intelligent client function, because relationships change.”
In practice, the extent to which a provider will be able to integrate often depends on the culture and attitude of the client, and there is still a reluctance among many to truly embed a third party as a genuine partner, suggests Noel Clancy, chief executive of Shepherd FM.
“It becomes a bit more difficult where communication with the core client team is required,” he says. “If you’re smart, you’ll have someone who fulfils that role with the client, to act as the interface. We have one client where we are regularly on global briefing calls but if we were to go and someone else came in, it may take another 18 months for them to allow another provider on a call which may have their chief executive on it.”
Often the barriers stem from the way in which a contract is set up in the first place, with providers pressured on price by procurement functions, suggests Bowen. “It’s quite common for a specification to be developed by the frontline operational people and at the negotiating stages for a supplier to say they could meet that price if they did something differently or lowered that standard,” he says. “You end up with a contract which isn’t really what was wanted. It’s very difficult for the supplier in those situations, because people want more than the contract specifies. But if you deliver what they wanted, then you’re probably going to start failing your KPIs.”
Neil Edmond is operations director at BTFS, a BT subsidiary that acts as the group’s internal FM team following the buyout of its joint venture company Monteray in 2012. He’s seen a variety of models and says they all have their pros and cons, but believes the removal of a contract management aspect has been helpful in getting a closer working relationship with the rest of BT.
“I have seen outsourced models where the contract management tended to filter out some of the messages that needed to be said or maybe there were things which shouldn’t have been said, and it can create friction, purely because of misinterpretation of expectations,” he says. “Or if a piece of bad news has to be given you’d rather have it straight than have a contract manager soften the blow because you often mix the messages up.
“Now I have direct links to the managing directors of the various business lines.”
Relationships can founder at a personal level, too, says Bowen.
“If you have a multi-level relationship management model, you’ve got people from the client and supplier at a coalface level, area manager level, and then possibly an account management level above that,” he says. “If everybody’s joined up it works quite well, but if you find that the relationship is really only at the upper level, then issues that come up at the coalface ripple their way up one side, rattle across and come back down the other side, and those sorts of things can fester. To have a really tight relationship you’ve got to have the interface right at all levels.”
A few years ago it would be the case that the most integrated models were found in total FM contracts, but this is now not necessarily the case, he adds, as larger providers have tended to standardise their offerings.
“A number of smaller FM companies are now springing up or joining together to form mid-level organisations, because they have seen the gap in the market in providing a bespoke solution for clients,” he says.
For some, the ultimate in integration is to run an in-house team, or a closely affiliated variation on that, as practised by BTFS. There have been a number of benefits here, says Edmond, including getting control over its own staff training and employees having a stronger sense of identity as part of the wider BT brand.
Yet even here, there is no escape from economic realities or the need for the model to stand up to intense financial scrutiny, which can sometimes lead to some difficult conversations internally. “There’s an increased chance in this arrangement that people think I’m just going to say ‘yes’ to everything, because I don’t have a contract that says it’s not core,” says Edmond.
“There are still a lot of things that I say no to simply because the resources I have are fully utilised. I’m not going to create BTFS to slowly watch my cost-to-serve creep up – because if it does I will be outsourced again. I’m under no illusions about that.”
Open book model: joined-up thinking
When Westminster City Council, the Royal Borough of Kensington and Chelsea, and the London Borough of Hammersmith & Fulham awarded Amey a 10-year, £150 million contract to deliver a range of FM services across the three boroughs in 2012, it was built on the idea of an integrated relationship based on an open-book model.
“We’ve taken the concept of open-book to its fullest,” says Paul Byatt, operations director at Amey. “Our customer has full access to all our systems and all our data and they provide information to us to help us deliver what we need to do. We asked how it would work in an ideal world, and we’re working to that at the moment.”
From a client perspective, the arrangement allows the benefits of working with a large outsourced provider without the some of the constraints that can come with single-service offerings.
“Obviously Amey have better buying power than we would have as a single entity, and they have different people in the business that they can pull in as well,” says Debbie Morris, head of tri-borough facilities management, who now works on the client side as part of a “link” team between the three boroughs, based in the same office as the Amey team.
The contract itself is relatively early days, but Byatt hopes it could lead to other work across the three boroughs. “We look after many council buildings such as town halls, libraries, museums and schools, but there are others such as social housing and care homes that aren’t in our portfolio,” he says. “That’s maybe an opportunity for the future.”