Facilities management services
A quick guide to getting the best for your estate
GUIDE
The standard of facilities management (FM)
services can significantly affect the general
experience of occupiers and users of a building.
A grubby, ill-repaired estate leads to complaints,
discontent and higher maintenance and, for the
owner, higher lifecycle costs in the long run.
Passing FM risk and responsibility to a privatesector contractor can lead to a raising of service standards, improved estate
management data and better value for money. But you should approach the market with a clear commercial position on what is required in terms of contract scope and approach to risk transfer.
As a rule of thumb, the greater the risk transfer, the greater the cost. In these times of spending cuts and estate rationalisation, how do you balance service improvement and risk transfer against increased costs?
The options
‘There will be a tension between
what falls within a fixed price and
what does not.’
The options range from a PFI style risk transfer where the contractor takes full responsibility for lifecycle and maintenance services over a long term contract (20 – 30 years) to a planned preventative maintenance and statutory inspection service where the contractor takes minimal risk over a shorter period (2 – 5 years). There are many
permutations possible, with varying degrees of risk transfer through the inclusion of a preferred mix of hard services, soft services and lifecycle responsibility.
The scope of the contract and level of risk transfer have a direct impact on the resourcing of the FM service and therefore the price – that much is obvious. But risk transfer and therefore price is also governed by how the service is to be paid for – for example through requiring the contractor to provide certain services as part of a fixed price. There will be a tension between what falls within a fixed price and what does not. If the contractor won’t take risk on the cost of reactive maintenance, it may be worth considering requiring the contractor to take the hit on maintenance events below a minimum value threshold (eg £300).
Low Medium High
Shorter term (2-5 years) Medium term (5-20 years) Longer term (20 plus years)
No significant risks will be
transferred Will include some risk transfer but not in all areas (eg lifecycle)
Will include transfer of lifecycle risk
Payment is likely to be on a call
off basis Payment is likely to be against KPIs Payment will be on an availability basis
Likely to be suitable on an
older estate Likely to be suitable where some risk transfer is possible Likely to be suitable only on a substantially new build estate
Performance is only ever as good as the specified requirement. Getting the specification right is critical, whether it is output or input based. It is also
particularly important to express
requirements as such, using language such as “the contractor shall”.
Key performance indicators (KPIs) and rectification times are the usual method for monitoring and incentivising performance, with deductions from the fixed payment for failure. With a higher risk transfer
arrangement, payment is likely to be against “availability” KPIs, but this may only be accepted by the market on new buildings or against extensive surveys of the estate.
Monitoring and incentivising performance
If there are other indicators worth measuring but which don’t link to performance (for example data in relation to a certain area), a separate set of indicators can be introduced which will be reported on a monthly basis. These are often referred to as “service indicators”.
Equally, especially with a high profile estate or where operations are sensitive or critical, it may be important to introduce a higher level of performance requirement for “critical performance factors”. Contractors will of course want to avoid a “hair trigger” for termination, but failure to meet three such factors in a year could lead to a termination event. These factors should be kept to a minimum and should relate to matters such as health and safety breaches or disaster recovery failures.
IS THERE ANY SCOPE FOR INNOVATION IN THE WAY FM SERVICES ARE
PROVIDED TO THE ESTATE?
If so (and assuming the contractor can play a role in this), the contract could include incentive payments for bringing forward and implementing innovative ideas. These could relate to service solutions, staff management or training, or even money saving ideas.
Data from an FM contractor can and should be used to influence estate management decisions. The data must be of a sufficient quality to rely on and must be providing the right nature and level of detail.
Part of the FM service may include a data collection and management system which can then be used to monitor the estate’s
performance and to identify which assets should be left to sweat. The FM service itself should be flexible to allow for changes in service and for changes in the estate. Spending the time early on developing with the contractor the type of data collection and reporting that will help you with strategic estate management is time well spent. If you are consistently getting reports containing information which is not useful or at the wrong times, this is unhelpful and the data collection and management service needs revisiting.
As well as thinking about data collection during the term of the contract, remember the need for consistent and high quality data to use on exit from the contract. This will be critically important to allow you to retender the service or bring it back in-house.
Data collection and strategic estate management
‘Spending the time early on
developing with the contractor
the type of data collection and
reporting that will help you with
strategic estate management is
time well spent.’
• advising the Metropolitan Police on the
reorganisation of its FM services across 100
buildings in Greater London
• advising the Foreign & Commonwealth Office on
the outsourcing of FM services in Posts across 14
countries in the Asia Pacific region
• FM service provision in the context of PFI and PPP
projects in the housing, health, schools and leisure
sectors
9605
CONTACT
Please talk to your usual Nabarro contact or Stephen Matthew, Partner
T +44 (0)20 7524 6301
Nabarro LLP
Registered office: Lacon House, 84 Theobald’s Road, London, WC1X 8RW. Nabarro LLP is a limited liability partnership registered in England and Wales (registered number OC334031). It is a law firm authorised and regulated by the Solicitors Regulation Authority. A list of members of Nabarro LLP and of the non-members who are designated as partners is open to inspection at the registered office. The term partner is used to refer to a member of Nabarro LLP or to an employee or consultant with equivalent standing and qualifications in one of Nabarro LLP’s affiliated undertakings.
Detailed specialist advice should be obtained before taking or refraining from any action as a result of the comments made in this publication, which are only intended as a brief introduction to the particular subject. This information is correct on the date of publication.
© Nabarro LLP 2012
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