DISCUSSION ON THE OUTSOURCING OF FACILITIES MANAGEMENT SERVICES

FOR
TERTIARY INSTITUTIONS

21 October 2010

TABLE OF CONTENTS
Introduction Comprehension of Facilities Management Services required by a tertiary institution Service offerings Capability Business and operational models Organisational structure Mobilisation philosophy Pricing Client confidentiality

Outsourcing a practical approach

Differentiators
Conclusion
Slide 2

INTRODUCTION
In recent years, some major players in the property industry have embraced the concept that facilities management is a growing discipline and that it has developed faster than almost any other discipline in the property industry. Grigg (1993: ix) summarises this trend by indicating that facilities management has developed faster than almost any other professional discipline and then goes on to state that recognition of these issues (growing facilities management services) is rapidly transforming the way facilities are managed in the public and private sectors from offices through to healthcare, leisure and educational buildings.

Slide 3

INTRODUCTION
This emerging management discipline can be described as the practice of co-ordinating the working environment with the people and processes of the organisation.

It is a combined / integrated approach at all levels within an organisation to plan and implement support facilities in line with prime business objectives.

Facilities management therefore becomes an integral part of the strategic

thrust of an organisation and is recognised as such by organisations

worldwide.
Slide 4

INTRODUCTION
The philosophy of integrated facilities management is based on the perception that facilities should seamlessly support the core

business of organisations and that the physical management of

these facilities should be separated from the management of the core business activities.

Slide 5

INTRODUCTION
Subsequently, in all spheres of business, top management has come to realise that they are actually running two distinct businesses within their organisations namely: their core business comprising products and/or services, and the non-core business consisting of all infrastructure and services that support the core business.

Slide 6

INTRODUCTION
The current school of thought is that organisations should focus their expertise and resources on products or services that create wealth / add value - their core business - and that all non-core activities should be managed by entities that are more suitably structured and resourced.

Increasingly organisations achieve this objective through the establishment of a facilities management entity to act as a single point of accountability and responsibility.

A single source of knowledge and management support is created.

Slide 7

INTRODUCTION
It is imperative to understand that the establishment of a facilities management entity does not necessarily entail outsourcing.

The key is that an independent entity must exist. Whether this entity is an in housestructure or whether this function is outsourced, will be determined by specific circumstances relating to the organisations needs and requirements.

Slide 8

COMPREHENSION OF FM REQUIREMENTS FOR TERTIARY INSTITUTIONS

Note: This discussion addresses property related facilities management services only. Gleaned from JHIs involvement with tertiary institutions, JHIs view is that the following parameters are essential to guide the Facilities Management requirements for a tertiary institution: The institution must have an in-house facilities management entity capable of managing service providers in their respective fields of expertise; This entity must form a pivotal part in the planning and managing of the institutions facilities; This entity must be placed in a position where it functions autonomously with regard to the execution of required tasks/projects;
Slide 9

COMPREHENSION OF FM REQUIREMENTS FOR TERTIARY INSTITUTIONS

The envisaged deliverables required by a tertiary institution can be summarised as follows: Condition assessment of immovable assets; - Example Maintenance management: Planned preventative maintenance; Day-to-day maintenance; Services management; Product management;

Space planning and churn;

Project and construction management; Utilities management; Risk management (OHS and COID acts, regulatory requirements, insurance, etc.); - Example. Budgetary control and financial management; Reporting.
Slide 10

COMPREHENSION OF FM REQUIREMENTS FOR TERTIARY INSTITUTIONS

The primary drivers of these deliverables are: Consolidation of operations within the tertiary institution; To enable the institution to deploy a comprehensive FM model through the process of governance, compliance and ethical business practices; To improve the overall service delivery to all stakeholders;

To drive efficiencies and potential savings;

To identify and deliver sustainable service levels.

Slide 11

SERVICE OFFERINGS - CAPABILITIES

Documents and processes required as foundation must include the establishment of an asset register as well as the standardisation of aspects such as contract documents, specifications, work flow processes, etc in order to:

Ensure that facilities are performing the function that they are designed for;

Gauge the condition of the various buildings and all its installations;

Benchmarking;

Reduce risks for the tertiary institution;

Manage facilities efficiently and effectively.

Slide 12

Umbrella

FM Policy Framework
Standards for FM Strategy for FM

Adjustment & Management of Change

Monitoring of Performance

Strategic plans for FM Planning & Scheduling

Condition Assessment Plan for Maintenance Budget for Maintenance

Building Blocks

FM Works Programme Execution of Facilities Management

Day-to-Day
Planned/ Preventative

Pillars

Emergency

In-House Outsource Special Purpose Vehicle (SPV)

Capacity Foundation
(Management, Operational, Technical)

Personnel

(Materials, Tools, Transport, Infrastructure)

Resources

Finance & Budgeting

Procurement & Logistics Information Technology

Slide 13

Management Reporting

Develop, Lease, Procure

Maintain

Fix, rebuild/refurbish or dispose

Financial / Regulatory Reporting

Life-Cycle of Properties

FM IMMOVABLE ASSET LIFE CYCLE MODEL

NEED FOR IA
Policy, Standards & Strategy

PLAN & DEVELOP

DISPOSE OF IA

Disposal of or removal of asset from original requirement or use Upgrade to new requirement & extend asset life cycle use

DISPOSE OR UPGRADE

INFORMATION MANAGEMENT SYSTEM & PROCUREMENT

CREATE OR ACQUIRE
Collect & update: Asset register Technical & operational documents Maintenance budgets & strategy Guarantees and/or warranties

Acquire Or Create Via: Development Purchase PPP Deal S & LB Deal Lease Upgrade

Med. To long term maintenance plans Upgrade or refurbish facilities Applications for special funds

REFURBISH OR ENCHANCE

OPERATE & MAINTAIN

Affected: In-house Out-source JV

In compliance with policy, standards & strategy, prepare & conduct: Condition assessments Rating & prioritisation Budgets Works programme s(re-active or pro-active)

Slide 14

SERVICE OFFERINGS BUSINESS MODEL BUSINESS

DRIVER
SPV

SERVICE OFFERINGS
LOGISTICS
MAINTENANCE

CLIENT
WORK SCHEDULING AND RESOURCE ALLOCATION

ENABLERS
CAFM

MANAGEMENT
SERVICES MANAGEMENT PRODUCT MANAGEMENT PROJECT AND

CALL CENTRE VARIOUS PACKAGES

POOL OF KNOWLEDGE Logistics Project consultants Planning consultants CADD consultants Services consultants

OF SERVICES AND FEES VARIABLE FEE STRUCTURE TO SUIT CLIENTS VARIABLE STRUCTURE TO SUIT CLIENTS

CONSTRUCTION
MANAGEMENT SPACE PLANNING UTILITIES MANAGEMENT CADD SERVICES RISK MANAGEMENT

External service
providers

TECHNICAL EVALUATIONS
(AUDITS)

EXTERNAL SERVICE
PROVIDERS

Slide 15

SERVICE OFFERINGS OPERATIONAL MODEL

COMPUTER AIDED FACILITIES MANAGEMENT

DOCUMENTS AND PROCESSES

LOGISTICS

FM SERVICES / DELIVERABLES

MAINTENANCE MANAGEMENT Planned / Preventative maintenance General maintenance PROJECT AND CONSTRUCTION

SERVICES MANAGEMENT Security Cleaning Hygiene Pest control Garden services Refuse removal TECHNICAL BUILDING

OFFICE INSTALLATIONS Interior design Space planning Asset tracking Programmes Budgets Tender documentation Contract administration Quality control Quality assurance Cost management Final accounts Debriefing Relocation Churn CAD SERVICES Record drawings SAPOA records Office installations

STRATEGIC OBJECTIVES APPROVAL FRAMEWORK

MANAGEMENT
Project definition

DATA FINANCIAL CADD CALL & QUERY APPLICATION

RESOURCE ALLOCATION EXPENSE MANAGEMENT AND CONTROL ASSET REGISTERS STANDARD DOCUMENTS WORK FLOW PROCESSES PROCUREMENT Supply chain reengineering Standardisation Contractor selection

Design concept Value engineering Appraisal Tenders Contract documentation Quality control

EVALUATIONS
(Condition Assessments) RISK MANAGEMENT
OHS and COID Acts Regulatory requirements Disaster prevention Emergency procedures Housekeeping Inspections Legal liability Insurance

Quality assurance
Cost management Final accounts UTILITIES Accounts Electricity Sewerage Water Refuse

Workstation layouts
Asset registers Evacuation plans Databases

Slide 16

OUTSOURCING A PRACTICAL APPROACH

The Facilities Management entity, whether outsourced or in-house must be autonomous as far as work flow processes, scope of work and method of execution is concerned, but control is exercised by linking job descriptions and task lists to outputs. Structured co-ordination between top management and the Facilities Management entity has to take place and operations are standardised throughout the organisation. In essence the execution must be managed in an IT-environment achieving centralisation and standardisation of information, streamlining of administration, the driving down of costs and the countering of the lack of skills.

Slide 17

OUTSOURCING - MOBILISATION PHILOSOPHY

Component 1
Project Setup

Component 2
Mobilisation

Component 3
Facilities Maintenance Plans
Workstream 5:
Building technical audits to determine: Scope of hard & soft services (Condition and requirements); Preparation of short -to long-term maintenance plans & budgets; Short term Risk & OHS Act requirements.

Component 4
Documentation & Reporting
Workstream 8:
Preparation of all technical documentation in order to: Draw up scope of works; Generic or Project specifications; Tender documentation; Review, analysis & recommendations.

Component 5
Conclusion of Mobilisation

Workstream 1: Confirm Steercomm

Setup of: Section 197 Transfers; Vacancies; University Staff;

Sign off Scope of Works & Deliverables

Workstream 2: Confirm Scope of works

Review and understanding of: Policy and procedures; Systems (Operational & Financial); Reporting

Workstream 9:
Preparation of the necessary reporting documentation for: Performance evaluation based on the SLA; Effectiveness & efficiency of Facilities Management of portfolio; Financial control within budget and works orders; Management and review of service contracts.

Workstream 6:
Preparation of hard & soft service contracts: Conclude maintenance & service contracts for both soft and hard (Mechanical, electrical & Civil) requirements; Conclude necessary inspection contracts & License Agreements (e.g. WAC, SAMRO, ASIB, etc)

Operational Start-up Workshop: Stellenbosch University & JHI

Confirm: Structure; Financial Proposal; Reporting Mobilisation; Execution.

Workstream 3:
Review and take-on of: Building maintenance plans & Budgets; Soft and hard service contracts; Utilities.

Operational Phase: Ongoing management, reporting, review & change management accordingly

Sign Project Charter

Workstream 4:
Consolidated of take-on data and confirmation of start up programme

Workstream 7:
Sign-off & approval to proceed

Workstream 10: Preparation of relevant tender documentation

Ad-hoc projects and small works as and when required. Slide 18

OUTSOURCING - STAFF TAKE-ON METHODOLOGY

Should a staff take on be required (outsourcing), the process is summarised as follows:

The appointed external company will meet with the Human Resources Department of the university to obtain the details of the employees and their conditions of employment, retirement fund, medical aid schemes and other benefits for comparison purposes with that offered by the external company. (Caveat: The university will need to discuss the business reasons for change, operational requirements and management agreement conditions or transfer of a business or part of a business as a going concern, with their employees affected by the Section 197 requirements);

After the external company has developed an understanding of the service conditions of the affected staff, we will do a gap analysis on conditions and propose a way forward. We will take care not to put employees in a worst off position;
It needs to be ensured that relevant trade unions, if applicable are invited to participate in the process at inception; The external company and the university will then arrange a meeting / meetings with Slide 19 the employees affected by the Section 197 transfer and explain the process;

OUTSOURCING STAFF TAKE-ON METHODOLOGY

Both the external company and the tertiary institution have to embark on a comprehensive change management process to smooth out the transit, including culture management. (Facilitated sessions, workshops, induction programmes, etc.); As part of the consultation process a communication strategy will have to be implemented which will incorporate the following: Weekly progress feedback updates, mailbox for staff concerns and comments on the consultation, comprehensive list of questions and answers available to all staff affected and roadshows; ICAS counseling support must be provided to the affected staff ( ICAS = independent counseling and advisory service, including physiological, legal and financial support); Affected employees must be invited to visit the external companys offices, meet their new colleagues, familiarise themselves with the office environment and their new working area; The external company will draft letters of appointment confirming the new employees continued employment and confirm an effective date.
Slide 20

OUTSOURCING - PRICING
A cost plus fee structure is proposed when considering outsourcing is
considered. However, it should always be borne in mind that fees/costs must not be the major factor in the decision to outsource or to manage facilities in-house. Although affordability is a vital aspect of the decision, the seamless support of the organisations core business must guide the decision. Fees payable should therefore be market related and based on the finalisation of the scope of work and the involvement required from the external organisation.
Slide 21

OUTSOURCING - CLIENT CONFIDENTIALITY

When considering outsourcing, the tertiary institution must ensure that it engages with a value driven organisation with a professional credibility. As a minimum, the following controls must be put in place: Client focused structures; Separate physical location of staff in offices; Firewalls between client operations (System, mindsets, data, etc.); Ring-fenced data and systems; Access control on systems;

Confidentiality is part of every staff members conditions of appointment.

Slide 22

DIFFERENTIATORS
OUTSOURCING MAY ADD THE FOLLOWING VALUE:
Utilisation of battle-tested procedures, processes and documents; Exposure to the latest facilities management trends in the commercial property industry; Lowering of costs due to economies of scale; Benchmarking with industry norms;

Countering of the shortage of skills;

Countering of shortage of capacity.

Slide 23

DIFFERENTIATORS - SAVINGS
The following are examples of savings achieved by means of outsourcing exercises in the commercial property industry
Procurement Soft Services : Financial institution Cleaning : R10-million p.a Security : R14.4-million p.a. Total saving : R26.6-million of R85-million portfolio spend
o Procurement Soft Services : Listed property loan stock company Cleaning : R130,649 p.a Security : R339,883 p.a Hygiene : R129,926 p.a Saving : R691,501 p.a of a total R3.46-million p.a portfolio spend o Procurement Soft Services : Private property company Cleaning : R399,280 p.a Security : R340,537 p.a Hygiene : R124,700 p.a Saving : R1,012,582 p.a of a total R5.38-million p.a portfolio spend
Slide 24

CONCLUSION
Although there are many value-add aspects evident when outsourcing, there is no clear cut answer whether tertiary institutions should outsource the management of their property related facilities and infrastructure or not.

Slide 25

CONCLUSION
Should outsourcing be considered, the following aspects are crucial to consider: The institution must have an in-house facilities management entity capable of managing service providers in their respective fields of expertise; This entity must form a pivotal part in the planning and managing of the institutions facilities it must have the ear of top management;

When considering outsourcing, the tertiary institution must ensure that it engages with a value driven organisation with a proven professional capability and credibility;
A phased approach must be implemented;

The human aspect of outsourcing must be managed professionally.

Slide 26

Thank you

Slide 27