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Outsourcing Facility Services:Price, the Deciding Factor?

In this industry, on the one hand, everyone who owns a brush and a bucket becomes a “professional” cleaner or anyone having five janitorial staff starts up a facility service company. On the other hand, there are genuine BSCs engaging man, material and machine to deliver professional maintenance service. In this scenario, the client’s selection of the right service provider gets tougher.

For an outsourcing company – the client or the FM contractor – competitive rates for quality services form the basis of the selection process. However, the service provider’s claim of delivering better over the others and playing one service provider off against another often influence the selection process.

As Sandra Gomes, President at FIDELIS Facility Service Group, Greater Boston Area, puts it, “The biggest challenge facing our industry right now is delivering the right ‘price’ without compromising ‘value’. This is particularly difficult for any business, large or small, since all the costs associated with running a business these days are rising dramatically without raising their value. Yet, we are all expected to deliver the same service without feeling the impact. Combined to these challenges is the competition faced in this tough economic market, and only the select few with the right experience and hard work know how to accomplish more with less.”

“It is very important for the servic e provider to understand the customer business, culture and operational requirement for building a sucessful partnership with the client” Madan Kumar

Within these parameters, the role that facilities management plays in business operations and its impact on building occupants’ health and safety is crucial. Madan Kumar, Head Administration, Dr Reddy’s Laboratories Ltd, Hyderabad lists seven factors for evaluating and selecting a service provider for Facility Management:

  • Geographical Footprint: Capability of effectively delivering services in the required regions. For example, if we are looking for Hyderabad – present operations with other customers (probably similar capacity or more) and capacity to growth.
  • Proven processes: Competence and knowledge to transform client operations and having proven record in delivering services as per client requirement. For example, if the client is looking for cleaning and front office services, the processes they are following, cleaning technologies adopted, chemicals they are using and the tie-up with the material supplier has to be considered.
  • Personnel: Will the Client’s maintenance workforce be capable and well-motivated? Other factors like existing personnel strength, their skills and service provider training mechanism, capability of conducting motivational workshops for their personnel, etc.
  • Partnering and cultural fit: Building a successful partnership with the Client. It is very important for the service provider to understand the customer business, culture and operational requirements. This can be checked with other clients where they are servicing.
  • Third party vendor relationships: Existing relationships with the local third party vendors who will be delivering services, which is important for the best possible delivery by the IFM company. They should have good relationship with material suppliers, service providers and AMC vendors. For example, cleaning consumables suppliers, original equipment manufacturer (OEM) for AMCs, etc.
  • Business stability: Financially stable over the life of the agreement and the ability to sustain longer business relationship for seamless service delivery.
  • Relevant Experience: Industry experience with accounts of similar size and complexity and strengths and existence in the geography for the similar or bigger size for the similar services. For example, to outsource five lakh sqft facility services, the service provider should be already doing more or less five lakh sqft with at least a couple of clients.

“After verifying all the above, it would be better if we witness few or all of the services the service provider is delivering for a couple of other clients. This would give some factual impression of the delivery capabilities.”

Besides, these broad categories, says Samir Barve Vice President – Facilities & Infrastructure Development at HDFC General Insurance Company Ltd, passion & commitment, thorough knowledge of process, training on continuous basis to FM staff, inclusion of motivational aspects, recognition and proactive and transparent discharging of commercial obligations should be included.

Some of the strategic points that need to the considered in selecting the service provider, says Ravindranath Naidu, Managing Director, MFM Pvt. Ltd Bengaluru Area, also include power cost, implementation of EMS, 5S, waste management, activity schedules and redefine roles & responsibilities.

Energy management, one of the major concerns of the client, and a major portfolio of FM, is a determining facet in ascertaining the ability of the service provider. “Consider the total area, number of employees, CMD, RMD unit consumption, and unit cost to calculate the actual power consumption. This would help to arrive at the right cost for the right usage,” says Naidu.

Checklist:

  • To check what is being paid is the actual power consumed and is the right cost, audit the power bills;
  • Are you loosing power or wasting power check your neutral current.
  • Is harmonics present?
  • What is the power factor?

Ratings

Facility services or property management or for that matter building service management involves a lot of verticals like soft services (cleaning, security, parking , facade cleaning, pest control…), Technical services like electro mechanical services, MEP, WTP…) and other allied services.

Some of the factors that is considered while selecting a service provider include agency standard in the market, client retention ratio, quality of manpower, automisation deployment and most importantly the attitude of the service provider.

“The main objective while working out cost of service is to show minimum outflow. This cost is inclusive of spending on Government licence, energy bills, etc., which cannot be reduced. Hence, the outsourcing model is based on low cost,” says Ranjana Deshmukh, FM consultant.

“As a strategy it is always easy to identify the areas of outflow while analysing the outsourcing model, but it is tough to obtain optimum efficiency in operations during execution.

“If the work is based on SOPs using man, machine and material, it is possible to ascertain the actual consumption cost towards upkeep of certain premises/property. We must focus on available resources against the acquired one. Besides, whatever outflow is budgeted for can be reduced with the help of proper training and again the surplus after cost reduction can be utilsed for recurring outflow,” she explains.

“If the work is based on SOPs using man, machine and material, it is possible to ascertain the actual consumpation cost towards upkeepof certain premises/ property” Ranjana Deshmukh

However, in actual operations, due to differential behaviour patterns and attitude, even trained people at times exceed usage of consumables, leading to additional unbudgeted expenses. “Many times due to high footfall in malls, the control over consumables and toiletries become difficult, which add to the expenses?”

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