Discovering Value in Outsourcing Facilities Management - Life sciences businesses are turning to outsourcing as a way to drive down costs and support critical process quality. - BioPharm International


Discovering Value in Outsourcing Facilities Management
Life sciences businesses are turning to outsourcing as a way to drive down costs and support critical process quality.

BioPharm International
Volume 18, Issue 5

Smaller Firms, Bigger Benefits
The RFP typically asks bidders to examine the facilities and quote pricing. It should include enough information to enable providers to prepare realistic bids. This includes information about individual sites, work order histories, existing staffing levels, IT infrastructure to meet reporting needs, and a detailed specific scope of work and specific service levels. The RFP also should ask for references, typically from three companies in the same or similar industries with similar real estate portfolios.

Understand Baseline Facility Management Costs Without a baseline, there is no way to assess the benefits of outsourcing. Companies that cannot set an accurate baseline should find a way to benchmark their costs before seeking service proposals. This gives service providers a target for their bids and creates a foundation to ensure apples-to-apples comparisons.

One way to set a benchmark is to use cost-per-square-foot average figures for industry sectors from organizations such as Building Owners and Managers Association (BOMA) and the International Facility Management Association (IFMA). Another way is to ask a facility management service provider to create a benchmark based on its experience with companies of similar size, in similar industries, with similar facility portfolios. Facilities management companies operate millions of square feet of space and can produce benchmarks against which to compare service levels for virtually any task, in any facility, and any industry sector.

One common mistake in setting a baseline is to overlook the soft costs of in-house facility management, such as:
  • Human resources costs related to facility management employees
  • Information technology and software costs for supporting those employees
  • Costs for issuing purchase orders, paying bills, and managing facility budgets
  • Legal expenses for drafting and administering vendor contracts

After outsourcing, these costs disappear, and the support staff time can be directed elsewhere.

Pinpoint Opportunities to Reduce Costs Baseline data help identify areas where outsourcing can have the biggest impact. Janitorial service and landscaping often provide major cost reduction opportunities, as service providers are highly efficient in those areas. In addition, suppliers usually can streamline call center operations, identify energy savings opportunities, and improve overall equipment maintenance, thus driving down the cost of major repairs

Total Results Are the True Payoff Outsourcing is a long-term proposition, and to deliver the maximum long-term benefits, a service provider may need to invest resources up front. This is why we warn you that, in the short term, costs may actually rise. It also is one reason why a company should not select an FM partner on the basis of price alone.

One key to successful outsourcing is a transition period, which includes a variety of activities that have up-front costs but yield reductions later. A major company with multiple locations may have thousands of vendors under contract. A substantial reduction in the vendor base ultimately yields better service, lower contract administration costs, and greater pricing leverage — but the consolidation process takes time and staff commitment

In the long run, better equipment maintenance and a more proactive maintenance culture may save millions of dollars in greater maintenance efficiency, lower repair costs, and reduced downtime. But in the near term, technology improvements like computerized maintenance management systems, an FM partner may take a significant investment.

Another reason to avoid choosing an FM partner by just price is that service levels for some functions may actually need to be raised from the baseline to deliver the desired results. For example, in mission-critical facilities such as laboratories the primary objective is not to save money but to eliminate downtime and hold environmental conditions within specifications. The solution may include better maintenance of supporting infrastructure. That costs more initially but pays huge dividends in the long run.

Ensure Executive-level Sponsorship Without up-front endorsement from top management, outsourcing usually fails. Plans for outsourcing should be led by a steering committee that includes a corporate-level sponsor and representatives from all key functional areas: human resources, finance, accounting, procurement, facilities management, and others as necessary.

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