In-house or outsource? That is the question | Macro

In-house or outsource? That is the question

By Helen Playle, Account Director at Macro

by Helen Playle, Account Director at Macro

With the workplace being the main facilitator of organisational success, senior management should view facilities management as a key function and, as such, consider it strategically.

When looking for the most efficient service delivery there are many arguments for taking an insourced or an outsourced route. Whichever route you take, it is imperative that both hard and soft benefits are taken into consideration.

I spent years managing an in-house FM team but recently became part of Macro’s outsourced service team. Having experienced both sides of the equation, I have been able to witness the pros and cons of both.

The in-house solution
Achieving optimal service delivery, while utilising an insourced team, can provide a company with the opportunity to improve cost control, statutory and regulatory compliance, contract and performance management and reporting. A level of investment will be needed to recruit the necessary expertise, or to confirm a budget for training existing staff. This may result in the company having a team with a higher level of skill than is actually required on a day-to-day basis. An alternative would therefore be to hire specialist expertise on a freelance basis at an additional cost, as and when required.

With the in-house model, the responsibility to commercially leverage third party contracts across the portfolio remains with the business. This means re-tendering all FM services in order to deliver ongoing savings. In my opinion, these savings are not as high as those enjoyed by FM service providers. It also has a significant resource impact and adds additional cost to the business.

Without the industry expertise and a back-office support structure, the result could be a lack of established quality and environmental management systems, common standards for reporting and provision of management information, helpdesk services and CAFM systems. Additionally, the lack of access to up-to-date industry knowledge, as well as training and career opportunities for personnel, would need to be established at a separate cost.

Outsourced FM
By forming an alliance with a specialist service provider, a business can focus on its core activities, while still benefiting from a fully-integrated FM team. This team can reflect a company’s culture and objectives while providing access to the relevant industry skill base and technology.

Outsourcing also allows for a significant reduction in the number of contractual arrangements, introducing fit-for-purpose service levels and measurement protocols, with access to a specialist supply chain. This increases customer satisfaction and optimises innovation. I would also argue that the quality of service delivery has the potential to be higher and at a lower cost.

Another major advantage of outsourcing the FM function is that additional specialist support can be bought in at preferential rates for a wide range of services including project management, consultancy, property and asset management, lease consultancy, planning, energy and sustainability, sourcing, and health, safety and environment.

By standardising service levels and implementing management systems, a company can then provide a service that has a recognised identity and brand. This will also help to support any legislative requirement, provide the opportunity to delegate responsibility for compliance and mitigate the risk of non-compliance.

This approach enables the development of a defined service scope and performance management or measurement model that is based on recognised industry standards. Further, it provides the opportunity to develop a scalable and flexible business model which suits local requirements, achieving the right balance of service delivery. This can be done by utilising either global or national preferred sub-contractors - a localised approach - or by using a combination of both. Informed decisions can then be made regarding which solution offers the best cost option and the least risk to the business.

The financial benefits to be gained include a finance management system that gives clear visibility of operating and occupancy costs by location, allowing for accurate forecasting and spend analysis. It’s also possible to fix certain costs, as dictated by the business, over the contract term, which provides cost certainty and transparency. A service provider will provide detailed monthly financial reports and reconciliations which deliver a clear overview of costs.

Monitoring service provider performance
Targets can be set with the service provider to achieve a reduction in operating costs. This can include a reduction in administrative overheads, with the business only paying one invoice for the in-scope services, rather than processing multiple invoices from multiple service providers.

By setting cost-saving targets, the service provider is incentivised to deliver the required performance and drive down cost further by either leveraging the supply chain or through innovative service delivery. This could involve placing a proportion of the fee at risk for non-performance, or introducing gain-share initiatives, which means certain savings are spilt between the service provider and the supplier. It is worth considering, however, that while cost savings will be an important driver in the overall decision process, these must be balanced against the level of service…cheaper is not necessarily better.

Having recently transferred to Macro, I am heavily in favour of the outsourced model, although it must be noted that, for a business to receive the full operational and financial benefits, a realistic transition time needs to be set. This may not deliver the desired savings for year one but for the contract to be a viable proposition, a realistic contract term needs to be agreed to justify the service provider’s tendering and procurement costs.

Published with the permission of i-FM. (www.i-fm.net)

Follow Helen - @HelenPlayle

 

 

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