RES 22 – Facilities Management – Lecture 6 – Facilities Management Service

Providers
FM Service Delivery  Typically, there are five models for delivering FM
Models services:

a. In-house FM department,

b. Out-tasked service contracts,

c. Outsourced managing agent FM contract,

d. Outsourced managing contractor FM contract,

e. Total Facility Management (TFM) contract.

 Essentially, for types of service provision can be

distinguished:

a. Managing Agent
which act largely in a consultancy capacity as a
client’s representative.

b. Managing Contractor
The contractor takes responsibility for engaging and
managing the carious services contracts for a fee.

c. Managing Budget
This is a variation on the former two approaches and
hands the burden of multiple transactions to a
managing contractor.

d. Total facilities management

An arrangement where all facilities are managed by
an external entity (contracting company) offering a
single point of responsibility [i.e. complete portfolio of
services]
In-house FM Department  Here the organization has its own dedicated
management team an in-house employee to deliver all
FM services.

 Some specialist services, where there is no expertise in

the company, will be outsourced to simple service
contracts.
  These might include areas like lift and escalator
maintenance.

 This arrangement is often found in public sector and

educational organisations.
Out-tasked service  The outsourcing which took
contracts place in the 1980’s tended to
involve the contracting of
individual tasks, without the
inclusion of management
direction.

 Today, a preferred term used

to describe this is “out-
tasking” (i.e. without the
inclusion of the management
function and based on the
contracting of individual
tasks).

 This is where an organization has an in-house team of

FM professionals who procure and manage a series of
outsourced contracts.

 There may be a small team of in-house non-

management staff such as maintenance technicians to
run high risk operations or maintain vital M&E plant.

Outsourced Managing  In the managing agent model

Agent FM Contract the arrangement is adopted
when the organization has
determined that it wishes to
retain its own employees but
does not have the skill or
expertise with which to manage
them efficiently and effectively.

 By bringing in an external
organization to manage the
 facilities, the organization is essentially appointing a
client representative-managing agent.

 This person will act as if he/she were part of the

permanent establishment of the client organization.

 The managing agent will perform better and more

reliably if performance criteria are laid down, in fact, as
would apply to an in-house manager.

 Under this arrangement, contracts with service providers

will be with the client’s organization.

 TO coordinate services request and collate data to

manage performance it is usual to provide a centralized
call centre which will operate on some form of service
management software.

 The call centre can be provided by the FM company, a

third party or the client organization.

 In this scenario the organization will outsource most or

all services on contracts and will appoint a FM company
as managing agent to manage these contracts on their
behalf.

 Here the service contracts are between the client

organization and the service providers.

 The client organization is responsible for procurement

and the FM managing agent will manage performance.

 Although the FM services are outsourced the client

organization must maintain in-house knowledge and skill
to procure and understand the delivery of FM services.

 This is sometimes referred to as an “intelligent client”

function.
Advantages of Outsourced  Both agent and the various service providers
Managing Agent FM (contractors) can be selected on the basis of competitive
Contract tendering.

 Moreover, the appointment (or reappointment) of the

 agent should not affect contracts with service providers
or vice versa.

 Dissatisfaction with a given contractor would not place

other contracts at risk; Indeed, it could possibly assist in
those cases where poor performance has had a knock-on
effect.

 The managing agent approach offers considerable

flexibility for eh client organization to find and then hold
on to the combination of contracts that suits it best.

 In this approach there are no obstacles when some

services are part in-house and part outsourced.

 The managing agent role attracts special significance

since the client organization would be using the agent to
contribute expertise and exercise judgement when
deciding between in-house and outsourced service
provision.
Disadvantages of  It is possible that gaps might occur between the scope of
Outsourced Managing the various contracts, including that of the managing
Agent FM Contract. agent.

 Even so, managing agent can be made responsible for

ensuring that the scope of service contracts is such that
gaps do not occur.

 From a risk perspective, the organization is moderately

exposed. It may have to accept the possibility of
introducing an uncertain combination of risk factors by
its own selection of contractors (including the managing
agent) on an individual or piecemeal basis.

 The reasoning here is that a number of contractors

coming together for the first time will place extra
demands on the managing agent.

 Sound relationships between different contractors are

needed if services are to be provided property and
facilities are to operate efficiently.
 These relationships may take some time to develop.

 A conscious effort will therefore be required on the part

of the managing agent to integrate the work of the
different contractors in such a way that they become
molded into a single, efficient team.
Outsourced Managing  Structurally this is similar
Contractor FM contract to outsourcing on a
managing agent contract
but a step further whereby
the FM supplier will deliver
services to the client
organization though a
mixture of their own
resources and a series of
sub-contracts.

 The client organization

only has a single contract
with the FM supplier.

 The FM supplier develops their own supply chain and

manages the risk of service delivery across all services.

 Subcontractors will be under contract to the managing

contractor and will not have a contractual relationship
with the client organization.
Advantages of Managing 1. Since there is a single point of contact, there should be
Contractor FM Contract sizeable reduction in paper work and fewer payments.

2. Gaps in service provisions should be eliminated because

the managing contractor is required to ensure that they
simply do not occur.

3. By using a managing contractor to undertake some or all

of the work, with the support of subcontractors, the
organization is able to mitigate much financial risk.

4. The managing contractor is generally paid a fee, usually

expressed as a percentage of the value of expenditure
managed, and this can, be related to performance.

5. The organization is able to see its money is being spent

because open-book accounting is usually adopted in
which the client organization has access to the
contractor’s premises, books and records, including
invoices from subcontractors.
Disadvantages 1. The managing contractor may insist on larger trade
discount than are acceptable or may demand some
other preferential terms that are not consistent with best
practice.

2. In these cases, the managing contractor’s approach may

result in poor performance by the sub-contractor and,
therefore, poor service to the organization.

3. Under managing contractor arrangement it will be more

difficult to make changes to a contract, once it is
formalized, than would be the case under the managing
agent arrangement, unless the changes are provided for
in advance in some way.
Total Facilities  Organisations are also able to
Management give the full responsibility for
managing their facilities to a
single organization for a fixed
price.

 In this model one FM service

company delivers all of the
needed management and
services.

 The Total Facility Management

model offers an advantage for one organization to
manage and run all facility services.

 It is considered to cause less transactions and costs

compared to the multi-level contractor models.

 It is expected that total facilities management include

service deliver from a single service provider.

 In terms of risk, the organization is only moderately

exposed and can derive a good deal of comfort from
knowing that there is a single point of contact and less
administration.

 Value of money may not be quite as good as in

 managing agent approach, although theadditional cost
of organizing and managing many more individual
contracts in that approach must be taken into account.

 The TFM contractor may be better able to offer a more

complete and competitive solution to an organisation’s
needs than in the case of the managing agent or
managing contractor.

 Relationship built up over years between the contractor

and (specialist) subcontractors may mean that efficient
relationship is established from the start.

 TFM can provide a sound solution, but only if the

organization is prepared to spend time in identifying the
right basis for such an arrangement and then in
selecting the best contractor.

 In practice, things can go wrong. Reasons include the

contractor’s relationship with subcontractors.

 For example, the TFM contractor may insist on larger

trade discounts than are acceptable or some other
preferential terms that are not consistent with best
practices.

 Also, during the currency of a contract, the contractor

may decide to change subcontractors.

 These decisions are not always made to improve

performance, they may arise because the contractor is
seeking to increase margins through the employment of
a cheaper subcontractor.

 As with any change, newly appointed subcontractors-for

whatever reason they are employed – will undergo a
learning process.

 In this case, the client’s organization should ensure that

the procedure for assigning or subcontracting is open to
inspection and that they have the right, under the
contract, to prior approval before such assignment or
subcontracting.
Determining the best  The choice of which approach works best for the client
approach organization depend on many factors.

 Competition in selecting the best value option has to be

the criterion applied to all situations.

 Whether the organization chooses to manage all service

contracts itself, or passes the responsibility to a third
party, there will be risk and cost involved.

 The organization must decide which risks it is prepared

to take and at what cost, and which risks to pass to
someone else for what may well be a higher sum.

 Flexibility is a factor that has to be taken into account,

along with the attendant cost and risk.

 The selected approach should be one that will provide

best value for the organization and its customers.

 TFM has obvious attractions, but it will not relieve the

organization from managing the contract and the
interface between the contractor and its customers.

 In deciding between the approaches, the organization

must consider carefully how to ensure that customer
needs are fully addressed.

 The best value solution should not be one that

compromises on customer satisfaction.

 Finally, the client organization must always take into

account the track record of any contractor,
subcontractor or agent it may be considering, together
with an understanding of the particular expertise the
contractor or agent can offer.