A compact portfolio puts an FM much closer to facilities and services compared to a regional, country-wide or international portfolio, where they are spread out and more difficult to manage directly in each of the different locations.
When a relatively modest-sized portfolio is managed in-house, it may cost too much to pay for specialty resources such as energy specialists or maintenance management software that are not required full-time. And even if a small organization could hire its own specialist, providing for his or her ongoing certification, training and development is more challenging than in a larger organization.
As such, FMs overseeing compact portfolios may consider outsourcing. However, since there are both advantages and disadvantages, there are several factors to weigh in choosing an approach. There is no one single solution, so it’s important to consider the specific circumstances of a situation.
The objective of an outsourcing initiative is important to this decision. This is related to the reasons organizations outsource, such as achieving economies of scale, and which of them are relevant to the situation at hand. Just remember that not all the reasons for outsourcing will apply or generate the same benefits. It is important to assess objectives against the different approaches to outsourcing.
Beyond objectives, what are the specific issues being targeted for improvement or change? Is it costs, service, internal resourcing, challenges managing multiple contractors, lack of experience or technology? How will outsourcing specific services solve those issues?
If an organization already contracts most of its services, a bundled FM outsourcing approach would be easier to do, but cost savings may be lower. The key benefit is that the organization would procure and manage fewer suppliers by engaging a larger outsourcing company who can get economies of scale for subcontracted services. If the organization has in-house staff performing some of its services, it requires more effort to manage in-house but, depending on in-house costs, outsourcing could either be a cost benefit or add to costs due to added overhead and profits from the supplier. If the organization has sufficient in-house management to oversee multiple service providers, a fully bundled outsourcing approach may not be needed unless in-house management is reduced or reassigned to other activities. If internal staff already can’t manage the current workload, outsourcing can shift the effort of managing multiple subcontracted services or in-house resources from the organization to the new provider.
In weighing the alternatives, it’s important to consider how to maximize outsourcing advantages and minimize its disadvantages. Think of the services as a bunch of blocks and the FM needs to decide which blocks to put together. It’s possible to outsource the services that make sense as a bundle to one provider and continue to sub-contract services or self-perform services the FM is better positioned to oversee and manage and for which bundling provides fewer benefits.
What to bundle?
Here are some of the factors to use when deciding on what to bundle into an outsourcing initiative and what to continue subcontracting and therefore managing internally:
The more complex and specialty the service is, the more likely you should not manage it directly, and therefore it should be bundled.
The more connected and coordinated services are, the more likely they should be bundled and included in a single contract with overall management of those services by one service provider as an outsourced service.
The higher the cost of single service the less likely it should be bundled. Small spends or seldom-used services that are harder to procure in smaller scale are more likely to be bundled.
Control and organizational impact
The services with the highest impact and visibility to an organization should remain under its direct control instead of bundling them. The exception is usually highly technical specialized services that are better managed and coordinated with other technical services by an organization with the skills, experience and knowledge to deliver the services better.
Resources and administration
The fewer resources and administration an organization has available to manage multiple contracted services, the more things should be bundled into an outsourcing initiative.
Investment (equipment, tools, training, etc.)
Specific services requiring special equipment, special tools or intense training, re-training and certification are more likely to benefit from being sub-contracted, whether individually contracted or bundled into an outsourcing initiative based on other factors. Overall services that require software, resources or specialized management (maintenance management software or a 24-hour help desk are examples) can be expensive to implement for a compact portfolio but less costly when outsourced, particularly when bundled with other services.
Here are a few different bundling options that illustrate how services can be split out to do in-house, to subcontract directly and to bundle as an outsourced FM contract. The decision factors above may be used to help decide which is best for a particular organization. This example only includes a small range of possible services. The same principle applies to all other services an organization may require.
This is the classic fully outsourced model. It bundles the delivery of all services together under one outsourced FM provider. This is more likely to be seen in a larger, geographically dispersed portfolio. Depending on whether the organization owns the building or not, some of these tasks may be done by the landlord and the service provider interfaces with the landlord to ensure services are delivered as expected by the lease. Note that while the service delivery is outsourced, the strategic activities, including financial planning, capital planning and space planning, for instance, remain in-house.
Outsourced and in-house
In this model, certain activities are retained in-house. A split between in-house and outsourced services is common in larger portfolios where organizations have the resources to perform the functions in-house and where those services are more strategic or critical to their core business. This example keeps space and project-related activities in-house but some larger organizations may keep the help desk or security in-house, for instance, or have their own staff delivering cleaning or providing grounds services (landscaping).
Outsource and in-house and individual contracts
This is a mixed approach to maximize advantages and minimize disadvantages. This alternative takes larger, standalone services out of the outsourced bundle. These are services that may not benefit from being bundled under an overall provider in a compact portfolio. The items here would depend on an organization’s specific objectives and issues as described further above.
The in-house services are the same as the previous example.
The bundled services remaining include maintenance, CMMS (maintenance management software) and the help desk. The maintenance is bundled because it has many coordinated specialty services. The CMMS is bundled with maintenance because it is closely related to maintenance and requires significant investment and resources. The help desk is included for the same reason.
The individually subcontracted services are not closely coordinated or linked to the other services or each other except for grounds and snow and ice, which can sometimes be contracted out to a single provider who does both winter and summer services. In addition, the individually subcontracted services can be high cost due to the volume of activity (such as cleaning) or because they have a direct and visible impact on occupants and visitors to the facility. They are also easier to manage as standalone services.
FM outsourcing is a viable option for compact portfolios. However, applying it to the entire range of services without considering the issues and options may not achieve the best results. As with any business decision, step back and look at all the factors along with the advantages and disadvantages of each alternate approach before finalizing an approach to outsourcing an organization’s facilities services.
Michel Theriault is principal of Strategic Advisor, a facility, property and asset management consulting firm. The preceding article is excerpted with permission from the white paper Outsourcing Compact Portfolios, which can be accessed in full at www.fminsight.com/white-papers/.