The document discusses effective sourcing strategies for construction and facilities management services. It outlines common issues such as lack of focus on spending, appropriate personnel, and best practices. It then provides details on typical project categories and strategies for each. For major projects, it recommends establishing a cross-functional team and using a third party consultant to manage large, complex projects. For facilities management, it suggests conducting a spend analysis, developing performance metrics, and establishing comprehensive purchasing procedures. The goal is to lower costs, improve services, and apply best practices sourcing to construction and facilities services spending.

1. Effective Sourcing
Strategies
for
Construction & Facilities
Management Services

2. Effective Sourcing Strategies

Typical Category Breakdown

Common Issues

Necessary tools

Strategies

Opportunity Identification Methods

Case Studies

Summary

3. Construction & Facilities
Management Categories

Major Projects – Typical new construction, large
project in size and sq footage

Renovations - Renovate existing space

Minor Projects – New single room construction

Maintenance – Existing facilities operating and
repair activities

4. Common Issues
Sourcing Services

Lack of focus with respect to the magnitude of dollars spent
on these routine types of services (i.e. non major project work)

Lack of appropriate personnel (head count and skill set
deficiencies)

Lack of involvement by sourcing professionals using Best
Practices processes for the acquisition of services

Lack of purchasing policies and procedures for acquiring
these types of services

Lack of senior management support

Construction/Maintenance services viewed by management
as “necessary evil” that can be done by anyone with little
risk/benefit to the company

5. Common Issues
Establish Comprehensive
Purchasing Procedures

RFP/RFQ Development

Statement of Works Development

Supplier Selection

Supplier Evaluations & Performance
Management

6. Common Issues
Develop Performance Metrics

Cost

Time

Quality

Internal/External Customer Service

7. Major Projects

8. Background - Major Projects

Typically involve new construction/major renovation

One off process where large product/service
purchases are non-reoccurring

Large project in dollar size (millions of dollars in
FF&E) and sq footage (100,000 sq ft and up)

Company responsible for all FF&E (furniture,
fixtures and equipment)

Work with internal/external designer/design firm and
architect for specification development

Project duration lasts from 2 – 5 years

9. Issues – Major Projects
Some Key Issues:

Logistics

Project schedule, delays, contingencies, etc.

Disposal of existing FF&E

Refurbishment of existing FF&E

Relocation of existing FF&E

Attic stock

Maintenance costs

Relocation costs

New and existing asset tracking and
management

Equipment placement and testing

10. Project Team
SCHEDULING
ASSET TRACKING
DESIGN COORDINATION
Commissioning
LOGISTICS
Hardin/Cap
One
INVENTORY ANALYSIS
SWAT
Migration
QUALITY CONTROL
MIGRATION MGT
Scheduling
DESIGN
COORDINATIO
N
SCHEDULING

Delivery of all FF&E to
conform with project
and construction
schedule

Schedule all premoves and all moves


Schedule removal of
all non-relocated
assets for lease
turnover
Schedule deinstallation and reinstallation of
relocating FF&E

Schedule
refurbishment of
reused assets

Coordinate logistics
for inbound freight



Review
specifications
regarding price and
product availability
vs. move-in
schedule
Validate
specifications,
drawings, order
quantity, and
product types for
FF&E
Review
specifications,
drawings,
placement for
potential as-built
conditions, i.e.,
columns, window
mullions, ADA
guidelines
INVENTO
RY
ANALYSIS

Determinati
on of FF&E
to be
relocated

Determine
FF&E to be
disposed
of/stored

Determine
FF&E
requiring
refurbishme
nt
QUALITY
CONTROL

Prior to ordering
FF&E, review
product vs.
specifications and
drawings

Workstation
type/Quantities

ASSET
TRACKING
IT/Telecommunicatio
ns outlet placement



Specific FF&E power
requirements
Specific FF&E HVAC
requirements

Specific FF&E
plumbing
requirements

Manage and monitor
delivery/installation
of new and relocated
FF&E


Expedite all
repairs/replacement
of product

Determine
requirements
of current
asset
tracking
system, i.e.,
minimum
dollar value
of asset
tracked, and
types of
assets
tracked
Verification
of
requirements
, delivered
and installed
per
specification
s
Tag for
location
reporting and
migration
control
COMMISSIONIN
G
LOGISTICS

Schedule deliveries
and installation of
FF&E with
construction and
migration schedule

Determine if
warehousing is
necessary for
staging,
refurbishment of
existing furnishings,
attic stock, and offgassing


Coordinate deinstallation, move
and receipt of
relocating FF&E
Coordinate receiving
FF&E and utilization
of elevators and
hoists

Roll-Around testing
for IT/Telecom
equipment for each
workstation

Punch list all
workstations with
specifications and
drawings

Examine quality of
workmanship

Schedule repairs
and/or replacement
of FF&E

MIGRATION
MANAGEMENT
(EXECUTION)
SWAT



Ensure MEP
matches FF&E
placement schedule

Select crossfunctional team
comprised of
Hardin and
Capital One
personnel for
SWAT

Orientation/information
gathering (includes
Personnel, IT, Telecom)

Validation and
verification of relocating assets
Define function,
duties and
purpose of
SWAT for
project

Plan and coordinate all
activities with mover

Selection and pricing of
mover services

Move management

Post move analysis for
each move group
Activate SWAT
for project
duration to
ensure schedule
integrity
Define Day 1
move-in SWAT
team functions
and duties

11. Issues - Major Projects

Everyone wants to buy/manage/provide the
products and services required for the
project – Most for the wrong reasons

Furniture distributors

Design firms

Construction Manager

Property/Facilities Manager

Installation Company

Third Party consultants

12. Who Should Buy?

Most organizations don’t have the time or people
skilled in major projects to effectively manage/source
a large project in addition to normal duties

Optimum solution for major projects is the use of a
Third Party Consultant due to the following:

Works for clients interests

Objective in performance

Work in cross-functional team

Brings to the table extensive experience and history of
achieving results

Knows where the pitfalls are in these types of projects

Knowledge of all components of cost in the the Total
Acquisition Cost model

13. Required Information
Major Projects

Specifications for FF&E

Coordinated Drawings

Material Takeoffs

Project Schedule

Company Standards

Project Budget

Types of agreements for services with
Architects, Design Firm, Construction
Manager, Construction Company, etc.

14. Strategies – Major Projects

Develop initial bid specifications that are flexible
and do not lock in a specific product or
manufacturer

Obtain specifications well in advance of actual
RFP/RFQ issuance

Conduct Pre-Qualification process with potential
suppliers in the market

Challenge design decisions – Bring business
sense to the process

Consider the total cost, not just unit price

Build mock-ups when possible

Conduct focus groups with key stakeholders,
architect and design firm

15. Cost Savings/Avoidance
Opportunities - Major Projects

Key Issue – Early involvement on the
project prior to decisions being made
results in the maximum savings

Look for alternatives – FF&E:

Fabrics (COMs vs. SOMs vs. knockoffs)

Sizes - close to desired recommendations

Colors – close to desired recommendations

Reconditioned/refurbished products (i.e. Files)

16. Cost Savings/Avoidance
Opportunities - Major Projects

Negotiate total cost for all products/services:

Delivery & Freight

Installation/labor

FOB point/acceptance

Staging & off gassing

Attic stock

Continuation of product

Future needs

Packaging

Warranties

Protection of facilities during installation

17. Cost Savings/Avoidance
Opportunities - Major Projects

Find “hungry” manufacturer/distributor that
closely meets design requirements

Use third party provider, consortium and/or
buying groups to take advantage of their
leveraged spend for those products and
services you require

Reverse auctions – Use when and where
applicable, but be cognizant of total cost vs.
potential savings

18. Cost Savings/Avoidance
Opportunities - Major Projects

Scheduling – Common Mistakes That Cost:

Products come in too early - incur extra storage, delivery
and handling costs as well as significantly increase
potential of damage

Products come in late – Room/Floor/Building has to be
“opened” to allow for size, weight and required utilities of
FF&E resulting in significant costs and damages to facility

Don’t coordinate delivery and installation schedule with
CM, Operating Engineers, etc. resulting in trucks being
turned away, unnecessary labor costs being incurred

Labor disruptions – due to your suppliers, installers and
contractors resulting in work stoppage, sabotage, and
other damages and delays

19. Benefits
Major Projects

Lower total cost for required products/services 5% 40%

Avoid unnecessary costs for delays, handling,
damages, transportation, etc.

Lower project related costs by ensuring on-time
delivery of all required products, including relocation
management

Formal measurement of services provided

Supplier management metrics & enforcement

Ensure lowest total initial cost for project as well as
lowest long term maintenance, replacement and
support cost

20. Benefits
Major Projects

Best Practices sourcing practices applied to all
services

Apply professional sourcing strategies to purchase
of all required products/services

Leverage benefits achieved into internal Facilities
Management program

Develop/enhance professional relationships via
cross functional teams with internal departments

Take ownership of spend for capital construction
and maintenance

Reduction of inventory, improved use of working
capital

21. Facilities Management

22. Background
Facilities Management

Companies manage services for properties
that are owned/managed in following manner:

Use own employees, invest in labor, equipment,
fleet and parts

Use small, local companies to provide services
Primary issue is on-time, quality service, secondary
issue is price

Use third party provider to manage and provide
required services

Use combination of all of the above items

23. Issues
Facilities Management

Hard to leverage small service providers for companies
located in multiple cities/states

Labor costs typically are the majority of the cost of services,
material costs are traditionally small

Required services are on demand, hard to predict and/or
schedule, but typically require immediate solution (i.e.
water/gas leak, snow removal, etc.)

Property management companies provide many required
services in some or all of properties currently occupied

Internal existing Facilities/Property Manager is key
stakeholder and typically is resistant to change or perceived
loss of power by purchasing involvement and formalization of
process

24. Methodology

Opportunity Identification

Dedicate Resources

Establish Comprehensive Purchasing
Procedures

Build Organizational Support

Develop Performance Metrics

25. Opportunity Identification
Facilities Maintenance

Conduct Expenditure Analysis

Implement Business Process Assessment

Target specific areas for improvement

Implement Business Process Improvement

26. Tools, Methods and Processes
Expenditure Analysis
Business Process Assessment
Implementation of Business Process Improvement
Program

27. Opportunity Identification
Facilities Management

Expenditure Analysis Information

A/P detail

G/L detail

Current & future budget

Supplier detail

Specifications

Company Standards

Existing contracts/agreements

28. Expenditure Analysis

Conduct selective benchmarking and price validation
for all products and services

Develop data base detailing the following:
•
Current unit price
•
Product and service specifications
•
Total cost spent per product and service
•
Part numbers and/or other relevant identification of products
currently utilized
•
Spend by each supplier of similar product and service
provided
•
Identification of all providers of similar products and
services

29. Expenditure Analysis

Identify and access the required financial data

Assemble the data into a meaningful format
•
Build the Cube:
−
−

Commodity
−
•
Department
Supplier
Validate data
Analyze Data to Identify Opportunities
•
Create baseline spend summary
•
Identify benchmarks
•
Apply benchmarks to quantify savings potential

30. Expenditure Analysis

Financial Information Required
•
GL Database
•
GL Chart of Accounts
•
Accounts Payable Database (Invoices)
•
Accounts Payable Database (Supplier)
•
Capital Expenditure (All Items)
•
Budget for Current Year and Prior Year

31. Components of a Expenditure Analysis
Building the Cube
Summary Reporting
GL#
GL Description
Business
Unit #
Business Unit
Description
Total
Spend
Spend
%
Department
Ve
nd
or
550450 Cust omer Armored Service
Vendor
Code
GL# GL Description
564300 Telephone Expense
GENT EL
1358
172
Commodity1355
520050 Rent Bank Premises
564450 Professional Services Expense
563050 Legal Fee-Outside Council
564150 Stationery & Supplies Expense
520400 Maintenance & Repair BLDG
564300 Telephone Expense
564550 Courier Services
521100 Equipment Maintenance & Repair
544000 Direct Mailings
564100 Postage Expense
520000 Utilities (W&P)
520200 Employee Parking
520650 Janitor, Gardener & Supplies
571450 Security Guard Service
Other GL's
Total GL
Spend
0.53%
$2,558.80
0.04%
$3,999.92
0.07%
$2,215.00
0.04%
$198.50
Total
Spend
0.00%
Spend
%
$263,470.65 4.34%
$26,821.73 0.44%
$26,228.49 0.43%
Prime Matrix
GENERAL T ELEPHONE CO OF CALIF
$14,407.00 0.14%
A.Z. ST EIN CO., INC
$6,176.40 0.10%
D.C.N WIRELESS
$5,649.95 0.09%
DEPART MENT OF WAT ER & POWER Total Spend
$1,000.00 0.02%
Category
Spend %
AT &T
1048
520450 Parking Validations
$31,879.93
PACIFIC BELL
AT T
GL #
Sun Valley
North Holly wood
Granada Hills
Warner Center
Van Nuy s
Vendor Description
330
561075 Check Processing/Item Processing
Commodity
1000
2000
4000
6000
7000
Facilities
Industry Specific
Professional Services
Professional Services
Supplies & Printed Materials
Facilities
Technologies
Industry Specific
Facilities
Marketing & Advertising
Marketing & Advertising
Facilities
Facilities
Facilities
Facilities
Industry Specific
957,442
21.02%
490,353
10.77%
430,886
9.46%
318,333
6.99%
292,695
6.43%
267,157
5.87%
258,465
5.68%
148,027
3.25%
121,148
2.66%
116,827
2.57%
82,891
1.82%
77,983
1.71%
71,459
1.57%
65,102
1.43%
60,688
1.33%
58,230
736,571
1.28%
16.17%
4,554,256
100.00%

32. Expenditure Analysis
The information gathered during an Expenditure
Analysis is a crucial tool in identification of cost
reduction opportunities and implementation strategies.
This information is sorted in the following manner:
•
Summation of commodity category spend
•
Categorization of all general ledgers into commodities through
the development of a commodity tree
•
Detail the sourceable spend under contract
•
Detail the sourceable spend captured by the purchasing
department
•
Detail the potential opportunity based on the baseline spend

33. Commodity Tree
Total Sourceable
Spend
$4,554,256
Facilities
$1,694,506
GL Description
Utilities (W&P)
Rent Bank Premises
Employee Parking
Maintenance & Repair
BLDG
Parking Validations
Janitor, Gardener &
Supplies
& Repair
Equipment Rent
Auto Lease Expense
Equipment
Maintenance
Industry Specific
$795,670
GL Description
Armored Transport
Service
Rolled Coin Expense
Customer Armored
Service
Check Processing/Item
Processing
Courier Services
Courier Services
Security Guard Service
Marketing &
Advertising
$448,252
GL Description
Advertising-Employment
Advertising-Coml.
Advertising-Employment
Advertising-Civic
Public Relations-Golf
Tournament
Public Relations-Mixers
Public Relations-Gifts
Public Relations-Annual
Report
Public Relations-Misc.
Public Relations-Cruise
Public RelationsEvent Tick
Public Relation-Chambers
Direct Mailings
Membership Dues-Civic
Membership Dues-Other
Postage Expense
Subscriptions &
Publications
Public Relation-Openings
Other
$31,029
GL Description
Miscellaneous
Expense
Personnel
Services
$132,049
GL Description
Meeting Expense
Mileage & Auto Repair
Expense
Employee Relations
Health & Fitness
Expense
Temporary Employee
Expense
Employee Education
Expense-Outside
Employee EducationTraining/Supplies
GL Total
GL Total
GL Total
GL Total
GL Total
$1,694,507
$795,671
$448,253
$31,030
$132,049
Professional
Services
$829,453
GL Description
Records
Management
$16,601
GL Description
Supplies & Printed
Materials
$292,694
GL Description
Appraisal Fees
Legal Fee-Outside
Council
Legal Expense-Corp
Secretary
Legal ExpenseCollections
Prof - MIS
Professional Services
Expense
Prof./Film Processing
Prof./Filekeepers
Stationery & Supplies
Expense
GL Total
GL Total
GL Total
$16,601
$292,695
$829,453
Technologies
$313,996
GL Description
Maintenance
& Repair Computer
Data Capt. Equipt/Maint
ATM Expense
Telephone Expense
Equipment
GL Total
$313,997

34. Potential Save
Commodity
Low End High End Low End
Total Spend Savings % Savings % Potential
High End
Potential
Facilities
$8,737,066
8%
19%
$698,965
$1,660,043
Professional Services
$4,829,453
7%
21%
$338,062
$1,014,185
$11,795,671
12%
18%
$1,415,481
$2,123,221
$5,876,900
12%
24%
$705,228
$1,410,456
$10,678,544
11%
20%
$1,174,640
$2,135,709
Supplies & Printed Materials
$3,214,567
18%
35%
$578,622
$1,125,098
Personnel Services
$2,348,799
7%
22%
$164,416
$516,736
Other
$9,986,135
5%
13%
$499,307
$1,298,198
Records Management
$1,568,874
9%
17%
$141,199
$266,709
Industry Specific
Marketing & Advertising
Technologies
Total
$59,036,009
$5,715,919 $11,550,354

35. Business Process
Assessment
The BPA is a thorough analysis of the current supply chain
process to determine if your company is properly leveraging its
purchasing power.

We determine:
•
How much is being spent
•
Who is doing the spending
•
How many suppliers are being used
•
What is the basis for supplier selection
•
What are the critical needs of internal customers

Analyze data to identify greatest cost savings opportunities

Compare current performance to best practices and identify
areas of opportunity

Prioritize savings and improvement initiatives

36. Business Process Improvement
During a Business Process Improvement
Implementation you will:

Develop a Total Cost Model

Strategically source selected commodities
•
•
Develop strategies
•
Solicit proposals
•
Select suppliers
•
Negotiate contracts
•

Identify opportunities
Manage contracts
Re-engineer and streamline existing processes
•
Implement improved process flows

37. Total Cost Model
Product Cost

The actual cost of the product or service. Other examples beyond the
actual unit price are:
• Transportation
• Maintenance / Repair / Parts Support
• Delivery to users site
• Support materials
• Installation
• Surplus Value
• Set-up / Testing
Acquisition Cost
 All costs associated with processing an order from request through payment:
• Supplies
• Services
• Office Space
• General & Administrative
• Equipment
• Wages & Salaries
Carrying Cost
 All costs associated with stocking & maintaining inventory
• Warehouse expense
• Cost of money
• Insurance
• Inventory Management
• Taxes on inventory

38. Total Cost Model
Acquisition
Cost
AC
Product
Cost
Carrying
Cost
CC
Total
PC

39. Strategies for Improving Sourcing
Facilities Management

Establish a strategic sourcing program for
procurement of targeted services

Broaden purchasing department’s scope of
responsibility to ensure professional buying
principles are applied to the procurement of
services

Get purchasing involved as early as possible

Utilize cross-functional teams

Develop performance metrics

40. Process & Cost Improvement
Facilities Management

Use property management companies – leverage off of
their spend

Outsource management or all or majority of typical
facilities management services to a third party provider

Use consulting firm to identify opportunities and
establish programs specifically for your company – You
handle the program and purchases

Leverage spend via use of third party companies (i.e.
FacilityPro) to turnkey purchases of all indirect materials
and services required

Leverage spend

Reduce direct and indirect costs associated with purchasing
required services

41. Process & Cost Improvement
Facilities Management

Identify opportunities, aggregate and leverage spend

Rationalize supplier base – More volume per contractor,
lower cost of services in consideration

Negotiate formal agreements – Firm pricing for
labor/materials for defined time frame

Provide materials when possible using your existing
company contracts

Establish SOWs, SLAs and KPIs for services and
suppliers

Look for alternatives to “traditional” sourcing agreements
for services

42. Outsourcing
Facilities Management

The IFMA Survey indicated that 35% of respondents say reducing
costs and 30% say the focus on core competencies are the two
primary drivers for outsourcing services

According to survey conducted by the International Facility
Management Association (IFMA), the 10 services most often
outsourced are:

Architectural design

Trash and waste removal

Housekeeping

Facility systems

Landscape maintenance

Property appraisals

Major Moves

Hazardous materials removed

Major redesigns

Furniture moves

43. Benefits
Facilities Management

Lower total cost for required services – 10% - 30%

Formal measurement of services provided

Supplier management metrics & enforcement

Reduced A/P cost and FTEs – 5% - 20%

Rationalized supplier base – 50% reduction

Best Practices sourcing practices applied to all services

Move for reactive to proactive approach – contract
administration vs. tactical buying

Reduction of inventory, improved use of working capital

44. Case Studies – Major Projects
Merrill Lynch Global Headquarters
World Financial Center Project

$200 million procurement budget

Documented savings totaling more than $40 million due
to analysis of proposed expenditures and development
and implementation of recommended bidding and
negotiation strategies

Managed and was responsible for purchasing,
warehousing, receiving, installation, asset tracking and
installation services

Negotiated contracts for all furniture, fixtures, floor
covering, window treatment, capital equipment and
services including television studio, audio visual systems,
security systems, mail distribution systems, medical
equipment, move and installation services

Challenges included moving 12,000 employees into the
World Financial Center with minimal disruption to
employees

45. Case Studies
State of Pennsylvania

The Keystone Building houses four state agencies and
totals 940,000 square feet, $20 million budget.
Responsibilities included:

Developed and verified specifications as well as the
procurement, delivery, installation, and asset management
of all new furniture, fixtures and equipment

Relocation management activities included development
of the program materials, training and education, review of
overall records retention policies, procedures and existing
programs

Directed and coordinated the move of all personnel into
the new facility from the nine facilities

Developed a procurement schedule, bid strategy and
negotiating final pricing agreements and contract terms
and conditions

46. Case Studies
State of Pennsylvania

Presented recommendations for award of contract

Scheduled and received all shipments of new furniture,
fixtures and equipment into the new facility

Ensured all new materials were asset tagged, bar coded,
and scanned into the project asset management system

Supervised and managed installations of all FF&E to
ensure compliance with the installation specification – on
schedule and free of defects

Savings for project FF&E totaled approximately 25% of
project budget

Project completed almost eighteen months ahead of
schedule resulting in significant cost avoidance in rent
payments and associated costs

47. Case Studies
Facilities Management – Health
Care

Consolidated facilities management services to single
service provider

Reduced annual direct spend for services by
approximately 8%

Reduced annual indirect spend in accounting, personnel,
operating and overhead costs by approximately 5%

Maintained or improved quality of services provided

Established better control over process due to improved
span of control