Outsourcing facility maintenance: how to do it right
Outsourcing facility maintenance is common practice, but it can fail for a number of reasons. Apart from hiring the wrong contractor – who proves incapable to live up to the terms of the contract – the most important are:
- Failing to understand/define the scope of work before bidding
- Setting unrealistic or unmeasurable goals
- Not using adequate performance metrics
In this article, we aim to provide guidance for successfully outsourcing facility maintenance. This includes drafting contracts with clear requirements and commitments, based on best practices and quality standards.
To ensure that you will get value for money from your maintenance contractor, it is important to use a results-oriented approach, with incentives for good performance and penalties for non-compliance.
You should therefore replace input-based contracts that describe tasks with output-based agreements that describe requirements. This means that the service provider has the freedom – but also the responsibility – to demonstrate how they will meet these requirements; and how they plan to continually improve performance.
When outsourcing maintenance, there are different steps to go through. What are they and what is involved at each stage in the process?
A five-phase approach to effectively outsourcing facility maintenance
Phase 1: analysis
Start by gathering and assessing all relevant information needed to draft a good RFP. This includes looking at:
- Existing contracts
- Legal and regulatory obligations
- Internal rules and standards to comply with
- Organizational processes and tools (e.g. management software)
- Inventory of assets, maintenance history and costs
- Energy consumption and management
This phase is very revealing. It often shows that a lot of data is not available, at least not at the level of detail needed to conduct proper maintenance work.
Phase 2: definition of requirements
This is a crucial step, and the seeds of poor performance can most often be traced back to this stage. If you do not have a clear vision of the scope and statement of work yourself, how can you expect an outside contractor to understand the company’s needs or wants? Consequently, in this stage, you will need to:
- Define your facility maintenance strategy based on a risk/criticality matrix.
- Define Key Performance Indicators and translate selected KPIs into SLAs. Some common performance measures for facility maintenance are:
- Required availability
- Quality of execution (standardized measurement)
- Comfort parameters
- First time fixes
- Response time to trouble calls (goal: depends on criticality/levels of urgency)
- Schedule compliance, which measures the accuracy of the contractor’s weekly schedule (goal: > 95%)
- Preventive maintenance compliance, which measures how up to date a contractor’s PM programme is (goal: > 99%)
- Percent planned work, which measures percentage of total man-hours planned (goal: > 80%)
- Customer satisfaction (goal: > 95%)
- Define the frequency of reporting and the method/tools to be used for it (e.g. software for automated tracking of SLA compliance)
- Decide if you want to use condition assessment
- Establish whether you want to include an energy efficiency dimension
- Decide on the use of standards (e.g. EN15221)
- Define the scope and statement of work, and who does what:
- Own organization
- Main provider
- Specialist 3rd party providers, (e.g. elevators, access control, catering equipment, specialized equipment, inspections/audits)
- Establish roles and responsibilities, for example by using a RASCI responsibility matrix
Phase 3: request for proposal (RFP)
At this point, you translate the results of the 2nd stage into an RFP/specification for the tendering process. The RFP outlines the scope of work that needs to be done and the terms and conditions vendors must meet to stay in compliance with the contract. It is best to apply a standard structure, for example as provided by the European Standard for Facility Management EN 15221.
The RFP includes a compensation structure (calculation model) to be filled in by applicants and should distinguish between operational tasks and management tasks, such as meetings and reporting. Management tasks typically require 7 to 15% of the time spent on operational tasks.
A good RFP should not contain ambiguous terms (“regularly”, “in acceptable condition”, “appropriately”, etc.) and enable contractors to price their work, organize their staff and fully understand the way performance will be measured. It must clearly describe SLAs, bonuses and penalties. Be as precise as possible. Organize an info session and set up a procedure to clarify questions without favouring anyone.
Phase 4: vendor selection
You are now ready to award the contract by comparing offers quantitatively (calculation model) and qualitatively. When selecting a vendor, keep in mind: price is important, but even more important is the capacity of the vendor to live up to the terms of the contract.
Phase 5: managing the relationship
After selecting the vendor of your choice, kick off the collaboration and manage the change process, by providing guidance for supplier and internal team.
Then monitor results on a regular basis:
- Do a baseline condition assessment of your installations, and set the target condition for the end of contract.
- Run regular reports (preferably automated through software)
- Perform technical controls: a percentage of tasks should be verified on site
- Assess the installations versus the set target 6 months before the contract expires
Regarding penalties for not meeting SLAs we advise as best practice:
- During start-up: track results and provide feedback, but do not yet impose penalties for non-compliance
- After start-up, when a service level is not met for the first time: do not yet impose a financial penalty, but request the contractor to detail how they will address the issue and improve their performance
- Next period: 2% penalty on the applicable service area
- Following period: 5% penalty on the applicable service are
- After that the client is at liberty to terminate the contract
Outsourcing facility maintenance can be an effective strategy towards productivity and effectiveness of facilities, but good preparation is key to success. If you are going down the outsourcing path because your existing processes are inefficient and incapable of keeping the facilities in service, think again: outsourcing will not make your problems magically go away.
MCS Advisory helps organizations improve the performance of outsourced facility maintenance. Contact us if you would like to learn more.