Integrated services outsourcing model – a relic of the past?
For the past two decades, the property and facilities management industry has promised a consistent, fully integrated service delivery across various disciplines and geography for their clients in the private and public sector.
Too frequently the industry’s clients have been excited about promises made, but underwhelmed by the services actually delivered. As a result, there has seemed to be a constant changing of the guard as contracts have been cancelled or renewed reluctantly because of inertia and the cost of change.
During this period, as communication and information technologies have become more ubiquitous, service solutions have continued to evolve, and with interoperability the norm, outsourcing outcomes have been able to be different.
This is probably the time to move away from integrated service delivery through a single managing contractor to considering ‘best of breed’ solutions, all interlinked through a service integrator.
SERVICE LEVEL INCONSISTENCIES
In the past, there has been significant effort invested in structuring integrated service delivery platforms that could provide consistent levels of service standards across a range of related but very different types of service categories, each having their own challenges.
Through experience across many property portfolios serviced in outsourced contracts, it has become evident that human behaviours vary across the different facilities trades and skill levels.
Factors that motivate a lease negotiator may be vastly different to those that motivate a plumber. Yet across many integrated service delivery platforms, these differences are not recognised in structuring the performance management frameworks.
This difference is exacerbated when the service delivery is required across a wide geography covering many cultures. What may work well and be a motivator in one culture may have a different impact on another culture. In addition, the level
of skills that may be available in the various locations and cultures continue to vary significantly.
By persisting with integrated service delivery platforms across property, facilities and projects with prescriptive and onerous performance management frameworks, based on similarly structured service performance standards, it is likely that the contracts are being set up to fail. This has been evidenced in a number of contracts.
The reality is that the approach to service performance across disciplines and functions is best measured using methods closely aligned to each. This is also true across geographies. Although it may be an enviable aspiration to have one enterprise, and one standard approach, this neglects cultural and regional differences and capabilities.
BEST OF BREED SPECIALIST CONTRACTORS
More and more client organisations are moving to models where it is possible to procure ‘best of breed’ service contractors for specific functions and regions.
Although most management contract models are structured to have the client participate in the procurement process to achieve this kind of outcome, this seldom provides the level of flexibility and control needed.
The contract governance structure and the performance management framework usually mean that ‘interference’ by the client is not considered ideal.
Once these forms of client input start to occur, the management contractor may take the approach of stepping aside to abdicate decisions and accountability to the client. This is not an ideal way to administer a management contract with a fee attached.
At the same time, service providers are moving to providing significant components of direct delivery for specialist services because of reducing industry margins. Direct delivery capacity building in specialist areas within the large service providers is becoming the industry norm. In addition, trade purchases in the industry, with larger companies buying up the smaller specialist service providers, is unlikely to go away soon.
This new trend goes some way to eliminating the ‘margin on margin’ debate around management contractors procuring and managing a wide range of specialist subcontractors for a fee or additional cost layer. However, with this trend occurring, access to best of breed subcontractors is less likely to be accommodated within integrated service delivery contract structures.
Therefore, access to ‘best of breed’ specialist service providers, both related to particular services and local geographies, will likely need an alternative contract structure.
This is particularly relevant for clients who accept that operational property and facilities management is not part of their core business and the management of multiple service providers, as well as the overlay of the required portfolio data and information, should be outsourced.
CLIENT IMPLEMENTED PROPERTY AND FACILITIES SYSTEMS
In the industry many clients, as occupiers and owners of large portfolios of facilities, are still debating the best approach to manage their property and facilities data and information needs.
Most have come to the realisation that facilities information management is not a core function of their business model, and like to believe that the operational information needs of their accommodation portfolios can be done more effectively and cheaply by industry service providers.
But there is still a reticence by many industry clients to rely on service provider systems and start to consider the option of investing in their own system.
This thinking may be the result of bad past experiences or possibly the fear of losing control of their portfolio data – particularly in future changes to the contracting arrangements – or the complexities related to having multiple ‘best of breed’ service providers undertaking different specialised or local functions across the portfolio.
There are, however, significant challenges in this journey. There are many property and facilities data fields that are required to be interfaced to contribute to the effective operational, tactical and strategic management of a portfolio of accommodation facilities.
Data may relate to multiple lease arrangements, the physical and operational condition of assets, the servicing requirements of the plant and equipment, and the portfolio financial metrics – all aspects that are essential to underpinning all key facilities decisions. In addition, at some level the portfolio systems will be required to interface with corporate-wide financial or resource management systems.
To deal with the complexity of data, the large property and facilities management service providers have invested large amounts of capital to ensure that these integrated systems are part of their core business functions and one of their key aspects of competitive advantage.
These service providers now have highly modified propriety systems that they closely guard and do not sell as ‘stand-alone’ offerings.
For a client organisation, this can represent a major investment in systems, personnel, training and ongoing upgrades, all for an aspect of corporate management that is not core to the business.
This is funding that is unlikely to get the approval from senior leadership, particular in competition with other core business functions with limited corporate funding available.
PROPERTY AND FACILITIES MANAGEMENT INTEGRATOR
Is there a better way? Globally, there have been some initiatives to accommodate the key emerging property and facilities management objectives, including:
- non-core operational and tactical property service delivery should be outsourced
- single source of truth for all property and facilities data and information interface, across all functional requirements, is essential
- structures should be in place to ensure that ‘best of breed’ specialist and local service providers can be accessed to ensure service delivery excellence, and
- termination of a major service contractor should not lead to the loss of the system containing the property and facilities data and information.
Portfolio managements integrator contracts have been used in limited global applications for major corporates.
In these arrangements, the key portfolio data and information across all functional services are provided in a management information bureau arrangement, supplemented by key support and governance functions, such as portfolio reporting, performance management, budgeting and variance analysis, procurement and other similar functions, as the portfolio management integrator.
In this structure, the integrator will work closely with the client in understanding portfolio strategy and will translate this into service delivery packages that can be serviced by ‘best of breed’ specialist or local service providers.
The integrator, reporting directly to the client, undertakes all the contract management, reporting and aggregation of data and information.
With this structure in Australia, there will be many challenges to be addressed. But this may provide the client groups of industry with some confidence that the current integrated management contract can be relegated to a relic of the past that will move into the new world of portfolio management integrator, which has the capacity to manage ever-increasing portfolio ‘big data’ metrics, while still accommodating ‘best of breed’ service delivery in a value-for-money platform.