Accurate Data = Improved Commercials + Sustainable Partnerships CPO Event June 2017 - Saïd Business School, University of Oxford

1. Accurate Data = Improved Commercials
+ Sustainable Partnerships
5 June 2017

2. Adam Clayfield, Group Commercial Director Cloudfm
• Ops Director & GM background
• 15 Years multi-site retail and
distribution
• 7 years telecoms and call centres
Cloudfm
• 6000+ buildings nationwide
• 1400+ restaurants
• 150 multi-skilled engineers
• 7000+ contracted engineers

3. Facilities Management:
a relationship that rarely delivers
Costed on labour and parts, it would
be reasonable to approach hard
services FM as a commodity
All too often, failure to meet spend
commitments and quality targets
leads to disappointment and conflict
The outcome: costs increase year on
year, quality stays the same or goes
backwards

4. Why is FM treated as a commodity?
The FM industry is characterised by poor
data and lack of visibility on performance
Focus is to achieve the same or better
service for similar expenditure
External consultants often required to
demonstrate a defined saving
A clear baseline cost is not always known
But rates are…
30% Rates +
Fixed Price +
Materials
30% Rates
25% Rates +
Fixed Price
15% TFM
Market commercial models in use

5. Unfortunately the actual spend governed by rate-controlled
areas is limited
This is because*
• 30% of spend is attributable to quoted works
• Further 15% attributable to Capex projects
• 20% is attributable to planned maintenance
at a pre-agreed price
• So only c.35% is directly controlled by a rate
card – of which parts c.30%
*Based on £130m revenue. Data collected over 6 years
20% PPM
30%
Quoted
Reactive
35% Reactive
15%
Capex

6. A focus on rates prevents optimal outcomes
Aim: Demonstrate a saving from controlling the underlying costs
Outcome: Best rates are offered by the least transparent model
Aim: Improve call out rates for attendance
Outcome: Engineer competency and first fix degraded
Aim: Reduce reactive hourly rates for engineers
Outcome: Send to quote volumes increase
Aim: Reduce cost of parts and contractor markups
Outcome: Parts details hidden and artificially inflated

7. Total Facilities Management claims to overcome these issues
However the contractual complexities of this model make it extremely
difficult in practice
It’s attractive as it provides a degree of cost certainty, but..
Incentivises provider to hit a pre-agreed cost threshold, which they can
achieve by: cheaper people, delay and defer work, cut corners and bill for
incomplete activity
The SLAs and performance measures are controlled by the provider and
curiously are always met

8. Why TFM is inherently flawed
Excellent
information on
previous spend
Requirements for a successful FM contract
Control of job
volume &
activity
Continued P&L
accountability
for managers
Estate at known
and consistent
standard
At a TFM start up is this the case?
Limited cost benefit as the
costs and quality are known
and a large risk of service
degradation
TFM contract will end badly as
both parties entering the
contract are expecting to take
advantage of its terms
NO YES

9. Choose the right commercial model
Construct a sustainable model that incentivises both parties to do the right
thing
There is another way:

10. Control the provider and
supply chain with robust data
Don’t accept a model where there is no visibility
Ensure you have a clear real time view of all activity
Manage SLAs from hardwired data
There is another way:

11. Clear process that has measured control
points at every step in the journey
Human intervention only applied where
necessary to add value and governance
IT & systems should improve productivity,
not degrade it
Eradicate blind spots – no hidden costs, lost
jobs or failed processes
Very clear process designThere is another way:

12. If you have accurate baseline data and are willing to explore
other models, you can achieve a defined spend commitment
and improve quality
There needs to be an acceptance that any long
term sustainable model requires partnership
The customer’s role is to determine job volume
The supplier’s role is to manage quality and cost
This can be achieved by a model based on
Average Job Value

13. Constructing the model

14. We’re using AJV to drive down overall spend, improve
performance and increase compliance
30% reduction
in reactive jobs Year 1 23% reduction in PPM costs Year 1
Further 21% saving on quoted works
17% reduction in reactive costs Year 1
Further 22% saving Year 2
24% reduction in AJV
in Year 1
And most importantly we have long term sustainable
commercial terms that create true partnership

15. 15