What Buyers should consider when sourcing FM services

We are writing a series of Blogs to help Buyer’s of FM services understand the market and then what they should expect from the market.

This Blog focuses on What Buyers should consider when sourcing FM services in the context below:

• The FM services market
• Important factors to deliver the best client services
• Culture alignment
• Business objectives
• Size of a company
• Self delivery TFM
• Contract objectives
• Conclusion

A previous Blog focussed on typical FM delivery models. The next Blog will consider “What Should a Buyer Expect from an evolving FM Market”.

The Market

The FM Provider Market includes substantial multinational, self-delivery companies to “fleet of foot” international management companies, “boutique” FM suppliers targeting specific markets within a country or even regions within a country.

With the right risk transfer and client engagement, it is a capable market able to deliver a complex range of services. These range from high-volume labour-intensive services to specialist services that ensure organisations are compliant; these services enable clients to deliver core business objectives. We do not believe there is a single best model for all clients; it will depend on many factors including:

• Business service requirements
• Location of property portfolio
• Capability of supplier market
• Capability of in-house resource
• Size of contract
• In-house FM systems 
• Attitude to risk
• Attitude to cost

Some of the issues that clients should reflect on when outsourcing FM services are discussed below. Whilst acknowledging that this list is not exhaustive, it provides an introduction to some of the issues that will need to be considered during the outsourcing tender process.

Culture alignment is often identified as a key criteria to judge suppliers but is often difficult to define what aspects of a company’s culture needs to translate into the requirements of the client. For example, a creative business does not necessarily need a creative FM supplier – it merely needs a supplier that understands the FM model that support a creative business. A good starting point is to ensure that an organisation has particular track record in markets and can demonstrate they understand the issues in that market.

It is important for clients to understand where in the business cycle the client organisation is and what its objectives are. This potentially helps to identify the company who can best support those objectives. For example, there are companies who differentiate their offer on cost and organise themselves to deliver services in the most efficient way possible.

However, this approach often means there is limited resource for thinking creatively and FM companies with this approach are less likely to be able to respond to quality issues the client has. Others focus on particular markets and are seeking to be very knowledgeable about these particular markets and ensure they have systems that support the compliance issues for that market. This may mean the service is more relevant to a business at any given point in time but is almost certainly not going to be the lowest cost at a given point in time.

Size of Company and how FM Suppliers make you an important customer is one of the key factors in any relationship.

If you are a relatively small client of an FM company, it will often be the case that you will receive less very senior management time than the larger clients. Some of the smaller suppliers on our list may focus on particular client types and can provide the twin benefits of expertise in certain markets and senior management accountability.

However before dismissing the larger turnover companies you should also consider to what extent you may fit into their business model; a company that is vast in global terms may be smaller in the client geography and you may be an important client in particular geographies. Equally, some major suppliers seek to create small businesses within their overall structure ensuring that client’s have immediate access to a senior manager (with autonomy to make decisions) who has a vested interest that their client accounts are successful.

There are a number of arguments for and against “Self-delivery TFM”. Those advocating self-delivery would argue that this can reduce margin on margin (although this is not always the case as each business unit in a multi service organisation will need to make margin). Equally it is arguable that any self-delivery organisation can be equally capable across multi geographies and multiple services so may be less value for money than specialist sub-contractors supporting management organisations. Value in all cases should be determined by the actual tenders received including their approach and their cost and should not be judged on perceived generic disadvantages and advantages.

Clients should also consider how they can ensure that the contract incentivises the right behaviours and aligns with contract objectives. For example, what commercial terms / contract are you going to use (Fixed Cost, Cost Plus, Target cost etc) and what tools should be in place to manage performance (Service Credits, FM Systems and Processes, Performance Management etc).

Importantly, clients should not only view outsourcing just from their own perspective. They also need to sell the opportunity to the right part of the FM market to ensure that they receive the best offer from the market and attract the right level of competition. This can include understanding the market to make sure that the size and scope of the offer is appropriate for the market through to making sure that proposed risk transfer does not put off the supply market. 

In Conclusion

The FM market is mature and flexible enough to support a wide range of client requirements. However, it should be understood that all suppliers will have their limitations as far as geography or services or commercial risk etc. We have observed (from afar!) ITTs (invitations to tender) fail to attract ANY bidders because the industry could not (or would not) deliver what was asked for. When procuring, clients need to ensure that what they present to the market is actually deliverable, does not result in significantly higher cost – and preferably attracts more than one relevant supplier.  Equally clients need to ensure that the FM delivery model chosen not only supports market appetite but is also able to achieve the client objectives with appropriate risk transfer. 

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