Over the past decade, I have seen a significant cost reduction in FM (facility management) projects for most clients. Maybe it depends on the market, but unfortunately these have not taken into account the intrinsic cost of providing FM.
Interestingly, most of them were dominated by aggressive supply chain postures, with price as the only criterion. In two-thirds of these cases, including some global companies, the role of the operations team was obvious. They were muted in the bidding process and overwhelmed by the supply chain where only price mattered. In fact, in some cases contravening the governance process itself.
I see long term consequences of this trend which can only reduce the impact of FM. Organizations make colossal mistakes by not including all stakeholders and letting supply chains prevail over the merits of FM. Price is the only point of contention, no matter what the RFP (request for proposal) entails.
I understand that the Supply Chain objective is to seek efficiencies, cost savings and lean strategies in the operating structure through competitive pricing. But don’t overlook the intrinsic cost factor when looking for services with specific requirements. Comparison with the past benchmark is also not the appropriate criterion unless historical expenditures are verified.
Verification of the reality of expenses
Unfortunately, historical FM data is often not complete, or past maintenance expenditures are based on O&M patterns that do not meet baseline FM specifications. What is wrong with this process? First, RFPs are not properly mapped to the specific services and SLAs (Service Level Agreements) needed based on asset list, facility status, and budget expenditures. In addition, the evaluation of offers often lacks a thorough examination when these do not make it possible to ensure that the offers submitted are in accordance with the operational needs and the provisions relating to the associated costs.
Even the time it takes service providers to do their due diligence is never enough. Most site visits are rushed and time consuming. In most cases, it is more of a formality conducted as a compliance checklist than its main purpose.
In some cases, we have noted that asset lists are never provided and responses to clarifications are not complete. The copy of the draft contract provided with the RFP is generally a one-way document. You must accept all terms of the RFP with its bids or face disqualification if you choose to provide a disclaimer.
Especially in service tenders, there are vague references to thresholds with no clear correlation to asset class and conditions. For example, 20+ legacy structures being pushed by the supply chain to have threshold limits of $10,000 on a global basis for spare parts is just not understandable.
Vague comments on tenders
It’s the same in most cases – tenders don’t make clear demarcations between spare parts and consumables, leaving room for future disputes. Most calls for tenders do not clearly define the technical and commercial criteria for the evaluation and weighting of tenders. Furthermore, some are derailing their bidding decisions, prolonging the bidding process and undermining the validity of various commitments provided in the bidding documents. Most comments on the results of the call for tenders remain a formality.
In addition, there are vague definitions of pre- and post-qualification evaluation in published tender documents with procurement organizations. This leaves room for unethical competition that undermines companies that meet their standards. Ideally, the bidding process should take into account the minimum threshold of quality of service and infrastructure to eliminate these glaring shortcomings.
Why this apathy and why should owners or managers be concerned? An incomplete supply chain exercise will undoubtedly impact long-term costs with likely cost inflations, additional energy and labor costs.
Reducing costs beyond the minimum threshold is counterproductive from the perspective of all stakeholders. Any short-term cost reductions in FM or savings from supply chain negotiations will eventually eclipse huge mid- and long-term liabilities.
Also, it is more about looking after the security of the building itself as asset failures can be fatal with disastrous consequences. The history of construction accidents predicts its repercussions – so supply chains need to take notice of the merits of my concerns.
It’s time for stakeholders, developers, owners, regulators or laminating companies to align with FM best practices and realize the impact of these supposed cost savings. Underspending on FM will lead to poor maintenance regimes leaving dilapidated structures that in no time will bleed them for far more than they think has been saved.