The challenge of managing multiple contractors and the lure of economies of scale are driving many to consolidate more of their FM contracts with fewer and fewer suppliers. But what are the strengths and weaknesses of single-service, bundled and total facilities management (TFM) approaches?
According to the FMJ, 69% of the market outsources more than half of their facilities services. And only 6% of facilities services choose to deliver them entirely in-house. Although the trend to embrace TFM has slowed in recent years, for companies of a certain size, the appeal of outsourcing all the risk and complexity of multi-site FM management is strong. At the last count around 12% of all FM contracts were based on a TFM model.
But which outsourcing model is right for you? What are the pros and cons?
What is Total Facilities Management?
Total Facilities Management (TFM) is an outsourcing model where a single contractor is responsible for providing and managing all aspects of a company’s facilities management (FM) services. This comprehensive approach covers a wide range of services, including both 'hard' services (like building maintenance, HVAC, electrical systems) and 'soft' services (such as cleaning and securing).
Single service vs bundled service models
In contrast, the single service model looks to appoint and manage a range of specialist FM service providers to work with them. In this ‘best of breed approach,’ the company outsources to known suppliers and directly handles procurement, contracts and day to day relationship management.
In the bundled scenario, companies are looking to rationalise their suppliers by bundling together three or four similar services to be dealt with by one contractor. There might be a few types of services bundled (typically split between hard and soft FM services) and dealt with by different suppliers.
Why has the TFM model been so popular?
Outsourcing to a single operator means companies can cut internal FM teams and reap the benefits of economies of scale. Freed from the burden of everyday FM management, they can work with their TFM supplier on the ‘big picture’, focusing on data analysis, broader cost saving initiatives and other strategic objectives. That's the theory, anyway.
But, as Mark Whittaker points out in our recent guide to strategic asset management - outsourcing to single operators can also entail the loss of critical data to an organisation.
And this is a loss that many are no longer willing to stomach:
More and more organisations are saying ‘we want to own this data. We want to be in the driving seat rather than be reliant on contractors to share their data with us.’ They’re saying ‘It’s our properties, it's our data, it's our neck on the line if these buildings aren't compliant and something happens.”
Mark Whittaker – General Manager, Thomson FM consultancy & Chair of the Institute of Workplace and Facilities Management (IWFM)
So, what are the pros and cons of TFM vs single service and bundled approaches?
The pros and cons of a single service approach
In-house FM teams retain complete control over multiple contractor relationships:
Advantages
- A ‘best of breed approach’ means companies can build one to one relationships with contractors
- They can develop deeper relationships with these partners to drive better prices and performance
- Direct relationships with different service suppliers mean FMs can address problems in specific service areas in more targeted ways
- Control over all your contractor relationships should give you complete visibility of spending and allow you to determine overall delivery strategy
Disadvantages
- The burden of managing day to day tasks can take internal FM focus away from their ‘big picture strategic objectives’ - and the scale of the task can overwhelm resources
- Managing contractors across multiple sites and regions can be a major logistical challenge
- Many in house FM managers don’t have the digital tools to manage multiple contractors effectively
- Without access to real time data to track and benchmark contractor performance it can be impossible to see who is offering the best value, where problems might lie and plan optimisation activities
The pros and cons of bundled services
Bundles of related services are outsourced to specialist providers:
Advantages
- Risk is spread - you don’t have all your ‘eggs in one basket’
- When you procure multiple services from a single provider, you can lower the individual cost of each service
- Companies can achieve economies of scale, while maintaining more oversight and control.
- This approach allows you to pick and choose which services you want to bundle and which you want to retain or give to other suppliers
Disadvantages
- Your contractors may be sub-subcontracting - and you may not be aware of it
- Contractors may insist on using their own work request portals and reporting systems
- You may have to log on to more than one system to track progress or access data
The pros and cons of a TFM approach
All your FM services are outsourced to one contractor:
Advantages
- A TFM ‘one stop shop’ can take the headache of running multiple procurement processes away from you
- Dealing with a single point of FM contact improves focus and efficiency
- Economies of scale mean TFM providers can offer the most competitive rates
- They can offer a comprehensive range of ‘soft’ and ‘hard’ FM services and often impressive coverage that appeals to large multi-site businesses with property spread across the country
-
With a highly resourced TFM supplier, companies might expect better access to data platforms to report on KPIs and technology that smaller suppliers won’t be able to offer
Disadvantages
- TFM procurement deals are complex, multi year and large scale; once you’ve committed to them they are hard to terminate
- This can lead to a complacency on the part of the contractor when it comes to delivering quality
- FM providers have often grown their offering through takeover, acquisition and subcontracting. So, they may not be as connected or as ‘joined up’ as you might think
- The desire of the single umbrella company to offer such a large spread of services, even in areas where they’ve not traditionally had expertise means quality can be patchy
- You may see stark differences in quality between the provision of different services and between regions where different subcontractors are used
Taking back control?
In the past a typical journey for many businesses has been to move from Single Service to bundled services to a TFM scenario. Although in the wake of the collapse of Carillion, the faith in large scale outsourcing has been shaken. If you can potentially lose access to your entire FM services overnight, then is that a risk you should really be prepared to take?
The challenge of managing individual relationships with multiple suppliers is one that many businesses simply haven’t wanted to embrace. And the challenge of doing this in a large multi-site company with premises spread across the country can add to the pressure.
That said, while TFM and other supplier consolidation solutions can offer compelling cost saving opportunities, they often require sacrificing control over relationships and data that can stand in the way of long term service improvement and optimisation.
Is there an alternative?
But modern CAFM systems are giving companies and Facility Managers the opportunity to bring multiple supplier relationships under much closer control, through single software solutions.
How The Cooperative Bank moved away from Total Facilities Management
This was the decision that faced The Cooperative Bank as they considered the future of their FM services following the collapse of Carillion in 2018:
When Carillion failed we took the decision to go our own way. To start with, we managed contractors using Excel and email. And we began to see that in-house management was actually giving us way more visibility, saving management costs, and getting the job done more effectively. That's the point where we needed to get serious and start managing our process with a more structured platform.”
Ben Downer, Hard Services Manager, Co-operative Bank
But having liberated themselves from their monolithic TFM supplier, the team at The Cooperative Bank were reluctant to tie themselves into the large and clunky CAFM systems that dominated the marketplace. Instead, they were looking for a more flexible and bespoke solution which they could adapt to meet their needs.
They saw that new FM platforms were emerging that could help them bring previously fragmented data together in one place at the touch of a button - but without requiring them to make wholesale changes to their SOPs. They saw that these platforms came with contractor portals that contractors actually loved to use. And this was helping improve system usage that was in turn delivering more data and better analytics.
The big goal for us was getting contractors on board, so we could monitor their activities and control our spending with them. Contractors are now using the system to record their time and manage their site visits. We have got excellent feedback from them, and we continue to listen and speak to them every day."
Ben Downer, Hard Services Manager
The retreat from TFM contracts is being powered by disruption in the CAFM sector.
Where once companies might have felt they had no choice but to sign up for contracts with super-size suppliers, there is now a genuine alternative.
