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External fm presentation april 2014 fmp event v1


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External fm presentation april 2014 fmp event v1

  1. 1. Second Generation Facilities Management Outsourcing Gary Noy Director, Vendor Management EMEA and APAC Facilities Management and Property Event, Selsdon Park Hotel, Croydon 29th - 30th April 2014
  2. 2. Content • Weighing options • Future drivers • Risk of change • Market perception • Contract types and incentives • Transition • Contracting success factors • Relationship success factors 2
  3. 3. Weighing Options 3 • Options – Renegotiate • Keep current vendor – In source • Use own staff – Bid to market • Same or different bundles • May result in a vendor change – Mixture
  4. 4. Future Drivers Cost control/cost reduction New service lines New geographies Scalability Flexibility Asset class expansion Analytics/modelling Other 4
  5. 5. Value Opportunities • Evolution of systems, methods and processes • Supplier capability changes • Change in market standards Change in market • Acquisitions and divestitures • Structure, services, geography Change in customer’s business • Ideas for improvement • Remediate issues on current account Customer’s experience 5
  6. 6. Click to edit Master title style Analyse Current State 6 Commercial Structure Relationship Performance Investment/ innovation Vendor market position FutureImportance Market Competitive High HighLow
  7. 7. Risk Of Change 7 Enablers of risk mitigation • Early termination rights • Notice requirements • Termination assistance services • Rights to service data and information • Termination transfer rights – People, Assets, Contracts – IP (systems, policies and procedures) • Other contractual protections Risk of Change Lack of knowledge of the outsourced function(s) Lack of transferable function Service disruption Time flexibility Termination of existing relationship Stakeholder support
  8. 8. Market Perception 8 Ensure no perceived incumbent bias Demonstrate willingness AND ability to change vendor • Innovation vs. Price • Outcome vs. Prescriptive • Transformation vs. Tactical/Incremental • Collaborative vs. Directive Match sourcing process to objectives • Process • Decision • Scope Capitalise/re-engage based on history of previous market visit
  9. 9. FM Pricing Models •Vendor passes all direct costs of FM services through to customer without mark-up, with a separate management fee (margin) invoiced to cover overheads and profit. •Open book accounting of the pass through costs is essential for assurance •These may include a “Guaranteed Maximum Price” or Cap. Pass-through plus management fee •Vendor provides all services at a fixed price •Fixed price is usually only appropriate where the volume, standard and scope of services is constant or at least predictable •Main benefit to customer is certainty of charges •Downside is that the charges are rarely transparent Fixed price •Unit pricing of baseline levels of usage/output for specific items of service (e.g. Number of desks or back office transactions) •Setting a tolerance level over/under baseline levels (e.g. “cap and collar” gives the customer predictability over certain costs •Mechanisms for reviewing baselines can be in contract, they are effectively re-negotiations which can be time consuming Unit pricing/Baseline model •A very flexible service delivery model and allows for comparison of rates •No incentive for the vendor to innovate and/or reduce delivery costsTime and material 9
  10. 10. Transition Pre- Transition Transition Post- Transition 10 Coordinate transition between existing and new vendors • Knowledge transfer – To new vendor or customer – Cooperation between vendors • IP, software, assets and contracts – Determine if existing IP can be used • Personnel – Determine if there are rights to hire outgoing vendor staff • Communications – To vendors, stakeholders and customers Human Resources Contracts Finance Technology EHS/Quality Operations
  11. 11. Click to edit Master title style Contracting Success Factors 11 Clear Sourcing Strategy Avoid piecemeal process, inconsistency and lack of transparency Defined Service Requirements Clarity on type and level of services Address HR Issues Upfront Make provision for legal and communication activities Effective Change Management Effective processes and controls in contract Baseline Data Detailed budget, staff models and improvement tracking Preserved Leverage Non-exclusivity, termination/renewal rights. Effective governance process Understanding Pricing Structures Open book, risk/reward, fixed fee, gain-share etc. Flexibility Structure contract to accommodate growth/contraction Effective Risk Transfer Appropriate KPIs, avoiding margin stacking Understanding Contractual Content Particularly risk allocations, insurances, indemnities etc. Successful Sourcing
  12. 12. Click to edit Master title style Relationship Success Factors 12 Clear Understanding Align at start: Client needs and expectations Vendor capabilities and responsibilities Alignment Objectives and financial goals are aligned so that both parties naturally act in an aligned way. Prevents dysfunctional behaviour from self preservation Positive Engagement An assumption of trust and belief that the other party is trying to do the right thing Cemented on doing what is expected Motivation Customer team contribute to contract success Vendor and staff compensation based on customer satisfaction Capability Vendor must be fully capable of delivering what is promised at a cost both parties expect Data Quality Customer and Vendor use accurate, complete, readily available (and the same) information to make decisions Communication Customer and Vendor communication is effective at all levels for timely decisions Stakeholder Engagement Customer has gained full cooperation of all stakeholders who can undermine the success of the relationship Successful Relationship
  13. 13. Weighing Options 13 • Options – Renegotiate • keep current vendor – In source • use own staff – Bid to market • may result in a vendor change – Mixture • Considerations – Change in vendor can be costly and disruptive – Balance value with risk of vendor change – Be clear on the issues that you care about – Define what you need to achieve • Requires objectivity and market insight
  14. 14. Questions 14