Maximising the performance of FM contracts is a neccessity in today's business world, as Frank Booty discovers for FMX magazine
Some 80 per cent to 90 per cent of all business dealings involve the use of contracts. And in FM, contract management has never been more important. For instance, at global real estate organisation Cushman and Wakefield, head of FM Doug John says: "We want to work with our clients and supplier partners to deliver a seamless service. We represent our clients in front of their customers, as do our supplier partners, so it's in everyone's interest for it to be a success. Managing performance is key, and fundamental to demonstrating value and innovation.
"With clients looking for cross-border solutions, this can add a further dimension when ensuring consistent delivery, given the different cultures and maturity of markets in mainland Europe, let along the Middle East and Africa." "You need to ensure a level of flexibility is built into the contract and management practices need to work effectively. "Think global, act local" is a cliché but it does hold some truth.
"Being a global company we try to bring the best practice and expertise available in other countries and regions to the developing FM markets. This needs to be adapted to align with the local business culture. In some emerging market countries, trying to find a reliable cleaning or M&E maintenance company can be difficult, let alone one that's used to key performance indicators, and service level agreements."
For many in FM, until recently, contract management and administration had been handled by teams of people, often leading to loss of communication, missed contract dates, and errors owing to problems in allocating responsibilities.
But thee are solutions available. Contract management software is an innovative approach to the problem, providing some key features for professional managers to assist in removing the inefficiencies present in large-scale contract management and enable a more structured approach.
A major benefit in deploying contract management software lies in making the best possible use of assets. It enables FM's to monitor contractual commitment levels while constructing complex royalty formulas and payment terms. Another equally important benefit is risk minimisation, which occurs when key contract dates are missed. This assists FM teams in managing contract lapse dates, late fees, and avoiding unwanted contract terminations.
Maximising the performance of FM contracts is something Phil Ratcliffe, MD of Procore Project Solutions, knows well. Procore has worked exclusively with occupiers in the IT sector and public sector and many of the company's clients have sought advice on services delivered across borders.
"How do you know your supplier contracts are still providing the services you agreed?" asks Ratcliffe. He explains that each stage of the life of a contract needs a 'health check' to ensure it is performing to its optimum level. Whether at the beginning or any time during the contract, it's essential that performance is audited, areas for improvement are identified and, where necessary, corrective action taken.
"It's important not to just rely on the data chucked out by software - you need a more rounded approach," says Ratcliffe. "FM concerns people-related services. Just relying on one method of performance assessment can be misleading, FM today is a lot more complicated than it was 15 years ago. There's a need to get back to basics - say, annually - and find out what's happening on the shopfloor.
"With more and more management layers, there's a disparity between what senior managers think is happening and what is really going on," adds Ratcliffe, who says the biggest gulf he has found is "neglect of staff training" on the shopfloor.
"What can happen is that there are good people delivering a service, and then clever people distance themselves at higher management levels, who don't pay attention to putting anything back in the workplace," explains Ratcliffe.
But what are the methods that can be used to reinvigorate or improve the level of service being provided? Ratcliffe advocates a return to this shopfloor approach, examining data and how processes are supposed to work, and when documented, where services are to be provided. He says: "It's more than a traditional audit, and you can also add into the mix things like a mystery-shopper approach to test that the services are being delivered according to the agreed contract."
As to why anyone should investigate the performance of contract management, Ratcliffe adds that it shouldn't be considered an adversarial process. "It should be completed positively. Nothing is perfect. Adopting the practices outlined here means doing things better for both clients and suppliers."
Explains Johnson Controls operations director Andy Eastwood: "There are two issues for us - as a supplier to customers who increasingly believe maximising the performance of FM contracts is a key activity and in areas where we don't directly perform services but subcontract to service partners.
"For those who don't measure, how can you reassure customers and clients that you are delivering? You use the information measured to leverage improved performance = which is true for service partners or in direct delivery situations. Measurement is essential to reassure clients and to enable suppliers to use that information to improve performance."
Johnson Controls has built up long-term relationships with its customer base, much of it comprising blue-chip corporates and, says Eastwood, can offer the key differentiator of being a global operator in FM and real estate. "Using performance statistics we can see how individual countries are performing, simultaneously with the right metrics at a local level. For example, we can compare ourselves with ourselves, between the US and UK, within accounts and between accounts."
Tony Green, strategic account manager at CAFM supplier FSI, says contract management is the cornerstone on which the company's Concept CAFM package is based. "The system treats different contracts individually using common information," he explains. "Customers can be either contractors or clients. Take a large organisation with a portfolio of buildings: subcontractors come in to work at various parts of the site, and the contracts are produced in Concept. Users are tied in to individual contracts and see only what's been allocated to their contracts. Each contract is different and the system enables differentiation between contracts to measure items in different ways.
It's possible to filter information provided to people/users and configure information that's displayed with built-in service level information and key performance indicator data. It's also possible to identify performance management criteria among other contracts.
"Another type of customer is a large contractor with many clients," says Green. "It supplies labour and resources to all contracts, each with a different customer. A supplier coming in to maintain a building will be supplied with schedules and rates, do work under the contract relating to those details and have invoices according to specific contract settings."
Help desks address both perspectives. Operators do not have to be au fait with contract conditions. Information will be stored in the background and pulled through automatically when questions are being addressed. A contract covering a building will have independent conditions in place.
Green also points out CAFM can be used in other situations - for example internal departments offering services within the company to other departments through a contract. "Using CAFM, you can identify what's going on. There's an ability to measure and identify where savings can be made - and where they can't," he says.
The main driver is visibility of what's going on. In PFI agreements, service level agreements are agreed upfront and CAFM puts in place systems to enable managers to effectively measure the contracts are doing just that. Customer savings are achieved in phase two.
FSI customer Denne Maintenance is a major player in delivering M&E contracts, with services covering construction, maintenance, joinery, and mechanical services. Denne's experience encompasses social housing, residential development and maintenance, estate renewal, education, leisure, health, retail, commercial and industrial sectors.
FSI has written the integration tools required to allow the flow of data across the partners' implementation of the scheduling solutions in a partnership alongside Denne at Amicus-owned Swale Housing Association in Sittingbourne, Kent. Open book accounting with fixed management fees provided the framework to allow the contractor to plan strategically and invest. The resulting solution has since been adopted by the Audit Commission in its IT Best Practice Guide for Housing Associations.
A final point? Contract management software provides a central location for all team members to review contract details, make changes, and keep up-to-date with developments.