The facilities management (FM) technical press has much to say on the benefits of outsourcing. The FM service industry naturally emphasises these benefits in its approach to market opportunities but cannot be expected to provide independent and unbiased views.
Outsourcing is usually portrayed as a solution that saves costs, improves service quality and knowledge, and facilitates 'industry best practice.' Organisations considering outsourcing have often accepted these risky assertions without much research or checking.
The Case in Principle
The case for outsourcing in principle is a simple one, based on these arguments in favour:
- The 'non core' argument – whatever the organisation's business, it is unlikely to be delivery of FM services. Therefore, it won’t be configured to deliver these services effectively, or in an industry standard way.
- The 'cost' argument – the organisation doesn’t fully understand the FM service, cannot run it effectively and cannot readily tap in to economies of scale. Therefore it must be cheaper to outsource.
- The 'flexibility' argument – an external resource allows an organisation to adapt more readily to changing conditions and to modify its activities in the light of experience.
- The 'expertise and innovation' argument – an external provider has other clients in differing business sectors, effecting a synthesis of best practice and innovation that will somehow be shared by association.
There is some justification here. FM providers should indeed have a better FM delivery model and, because FM is their core business, they should have the experience to operate effectively. This should result in cost-effective service delivery with access to industry best practice and innovation. In turn, the client organisation should benefit from being able to 'switch on and switch off' the services they require, flexing their property servicing needs more easily.
Faithful+Gould helps clients with the analysis, decision making and processes around FM delivery – including, if it’s appropriate, the outsourcing process.
The Case in Practice
In Faithful+Gould's experience, the practical application and outcomes of outsourcing can differ significantly from the benefits promised by service providers. The 'non core' argument – in our experience, professional providers delivering FM as their core offering are variable and wholly dependent on the individuals delivering the service. The FM client’s ability to incentivise the provider is a key factor. Use of an outsourced provider is no guarantee of quality.
The 'cost' argument – clearly a well-managed self-delivered FM service should be less expensive than an outsourced service. Service provider margin, VAT implications and other taxation must figure somewhere. Significant efficiencies will have to be identified for cost savings to be achieved. The client organisation will want to ensure that this is truly down to efficiency, not service reduction.
The 'flexibility' argument – flexing services in response to a changing portfolio is potentially more straightforward for the client of an outsourced service. However, the implications of TUPE employee protection, together with service providers’ wish to avoid staff redundancy and redeployment costs, make this less straightforward than the FM industry suggests.
The 'expertise and innovation' argument – FM is a service defined by management of day-to-day, business-as-usual tasks. It is all too easy, and regrettably common, for service providers to focus on business as usual and not deliver innovation.
We always advise our clients to carry out a full analysis and options appraisal, with a realistic review of costs and benefits. If outsourcing is the winning option, follow up with a well-planned procurement exercise to select the delivery partner.
Outsourcing of FM services can certainly deliver benefit and is a real option for organisations who don’t want to manage services themselves. But it can also fail and fail badly. We always advise our clients to carry out a full analysis and options appraisal, with a realistic review of costs and benefits. If outsourcing is the winning option, follow up with a well-planned procurement exercise to select the delivery partner. Ensure that outcomes are tracked and that promises made in the heat of procurement are secured in a contractual agreement and then monitored. Faithful+Gould helps clients with the analysis, decision making and processes around FM delivery – including, if it’s appropriate, the outsourcing process. We have no rigid views and our focus is on helping clients identify the best solution for their individual circumstances.