Seminat at the Ministry of Justice Manchester on "To outsource or not to outsource? That is the question."

1. 1 | 2015 Key Learning Event – Outsourcing

2. “To outsource or
not to outsource?”
That is the
question…
Mark Whittaker
BIFM North

3. 3 | 2015 Key Learning Event – Outsourcing
Welcome & Thanks

4. 4 | 2015 Key Learning Event – Outsourcing
Recent Event Follow Up:

5. 5 | 2015 Key Learning Event – Outsourcing
Twitter
Today’s event: #bifmkle
@Whitbags
@MoJGovUK
@G4S_UK
@Jeremy Waud / @IncentiveFM
@StevenGladwin
@NHSProperty

6. 6 | 2015 Key Learning Event – Outsourcing
Why Outsourcing?
“Outsourcing in the UK facilities management (FM) sector is expected to grow
by 5 per cent annually over the next couple of years.
A study from AMA Research, The Facilities Management Outsourcing Market
Report – UK 2014-2018 Analysis, said outsourcing was still likely to be seen as
a way to make savings in the wake of the recession.
Last year, the market for outsourcing bundled and total facilities management
services was valued at almost £19.5 billion, and is forecast to reach £23.2
billion by 2018. Over the next couple of years, key procurement opportunities in
the public sector are likely to be with local authorities, the report says.”
March 2015

7. 7 | 2015 Key Learning Event – Outsourcing
“The facilities management (FM) market is predicted to rise
£10.7bn to £117bn by 2017, from a 2012 value of £106.3bn”
“The continued trend towards outsourcing is expected to ensure
future growth opportunities for facilities management companies,
with bundled services and integrated solutions, in particular
showing the strongest growth potential.”
The trend

8. Today’s Event

9. 9 | 2015 Key Learning Event – Outsourcing
Introduction to today’s speakers

10. MoJ TFM
Delivering an outsourced FM service solution for
the Ministry of Justice

11. Delivering TFM to the MoJ
Structure
 Background to G4S
 MoJ TFM Context / History
 Services provided
 Key benefits and challenges
 Outsourcing in the future

12. HOMESERVICES SUPPORTING YOUR BUSINESS CASE STUDIES CSR OUR VALUES
 80 years of service
 Operating in 100+ countries
 611,000 employees worldwide
 Serving 59 FTSE 100 companies
 Quoted on the London Stock Exchange
A leading global services company
G4S MADE A £1.95 BILLION
CONTRIBUTION TO THE UK
ECONOMY IN 2013
UNDERLYING
GROUP REVENUE
£6.8 BILLION
ABOUT G4S
Delivering TFM to the MoJ
Background to G4S

13. HOMESERVICES SUPPORTING YOUR BUSINESS CASE STUDIES CSR OUR VALUES
 Prisons
 Secure Training Centres
 Electronic Monitoring
 Prisoner Transport
 Immigration centres
 MoJ TFM
Government Outsourcing
G4S MADE A £1.95 BILLION
CONTRIBUTION TO THE UK
ECONOMY IN 2013
UNDERLYING
GROUP REVENUE
£6.8 BILLION
ABOUT G4S
Delivering TFM to the MoJ
Background to G4S

14. HOMESERVICES SUPPORTING YOUR BUSINESS CASE STUDIES CSR OUR VALUES
 Single, bundled or total facilities
management
 Top 5 UK FM and Security company
 Contract retention currently 97%
 Over 75% self-delivered
Trusted to make a difference
Leading organisations, from the Met
Office to Aggregate Industries,
financial institutions to public sector
organisations, trust G4S to deliver
facilities management services.
ABOUT G4S FACILITIES MANAGEMENT
COMPREHENSIVE
UK, IRELAND,
CHANNEL ISLANDS
AND ISLE OF MAN
COVERAGE
Delivering TFM to the MoJ
Background to G4S FM

15. Delivering TFM to the MoJ
MoJ TFM - Context / History
 Contract started February 2012
 5 years + 1 + 1
 300 Affected Properties
 Regional Delivery
 North West, North East, Midlands, Wales
 Mirror MoJ Structures
 Delivered through own staff (1600) plus subcontractors

16. Delivering TFM to the MoJ
Services delivered
 Soft services
 Security, Cleaning, Landscaping
 Hard Services
 M&E, Fabric
 Catering
 Projects
 Carbon and Energy

17. Delivering TFM to the MoJ
Advantages of TFM to MoJ
 One supplier
 No split responsibilities
 Significant cost reductions
 Established National supply chain benefits
 Centralised Shared Services
 Private sector capability
 Supplier can integrate delivery
 Security / ppm / handyman activities
 Allows MoJ to rethink delivery / management

18. Delivering TFM to the MoJ
Challenges
 1st generation contract
 Difficult to bid well
 Still working some of the issues out
 Ensure ultimate customer understands the new service
 This is a different service
 Consistency between regions
 Managing Change
 Court Integration / closures post spending review
 Need strong delivery team
 Passionate about the challenge of managing the many services.
 Supporting the vital work of the judiciary

19. Delivering TFM to the MoJ
Outsourcing in the Future
 G4S is a major Government Outsourcer
 Significant investment and innovation driving improved
performance and reduced costs.
 Significant contribution to society and the UK taxpayer
However the market is changing
 High degree of exposure and risk of reputational damage
 Margins reducing but risk increasing
 Challenge for Government to attract the right bidders
10

20. To Outsource or not
to Outsource? –
that is the question
The Practicalities
Jeremy Waud

21. The Practicalities
‘Where outsourcing has worked
and where it hasn’t and the
important lessons learnt’

22. Getting it right can’t be that hard can it –
what are the golden rules?
S=R*(2x90/100)+ t3+e3
Success = Relationship x at least 90% commitment from both
parties + lots of time and lots of effort
Anything else fails –
its just a case of when, where and who gets the blame!

24. The Practicalities
‘Where outsourcing has worked
and where it hasn’t and the
important lessons learnt’

25. Examples of positive outsourcing - 1
Crystal Peaks Shopping Centre – Sheffield
110 units, 650,000ft2, + retail park - Owned by Hermes
Managed by Cushman & Wakefield - Workman from 2013
Originally in-house M&E , outsourced Security and separately Cleaning
Cushman & Wakefield placed TFM contract with Incentive FM as in 2008
Contract extended twice and client team has 2 staff on site – IFM have 59
Excellent Model – Great cost Base – Good working relationships

26. Examples of positive outsourcing - 2
Bluewater Shopping Centre – Kent
400 units, 1.6 Million ft2, 17 - years old
Owners - Land Securities, Hermes & Lend lease Fund
Managed by Land Securities (Lend lease up to 2014 )
Outsourced as TFM from day 1 in July 2008 - (IFM Consultancy 2003 – 2012)
Initially McLellan FM (Interserve), Lend lease FM (Cofely), now Incentive FM
273 contract staff transferred 1st October - Client team on site – 16 people
Always a great model – Excellent & positive staff culture – Great results

27. Examples of positive outsourcing - 3
Liverpool Football Club
Anfield, Melwood, Academy, Warehouse, Chapel St HQ
In house management + multiple single service contracts
Strategic review conducted by Incentive FM Consultancy 2012
4 security, 5 cleaning and 3 M&E contracts all failed at new tender
VSG Security, Cleanevent Cleaning, Integral M&E appointed in 2013
Reduced Cost – Smarter – Slicker - Better

28. Poor outsourcing examples
Encouragingly – these are harder to find!
– perhaps that answers my own question…………

29. Poor outsourcing example - 1
(LOCOG) UK Olympic Games 2012 – Security Contract
Well documented shambles – but was it all down to G4S?
Il-conceived and unworkable client strategy
Impossible manning requirements signed up to
Classic example of bad strategy, procurement & implementation
Embarrassment all round – Poor idea – Poor Execution

30. Poor outsourcing example - 2
Navy training estate (south coast) Originally Flagship/VT Babcock 20+ years
First a training organisation – then soft and hard fm – it ‘Grew arms & Legs’
Navy knew it was too expensive – it needed to be changed
New deal - ‘fleet outsourced activity programme’ including Army & Air force
Awarded in 2014 on even larger scale to ESS supported by Interserve
Unwieldy – lower standards, but affordable cost base ……………
So is that bad then worse, or bad then better? You decide……

31. Poor outsourcing example - 3
Multi-client, multi-service Southwest One deal - Avon & Somerset Police,
Taunton Deane Borough Council and Somerset County Council
Let in 2007 to IBM – in legal disputes 2012
Contract unpicked – what went wrong?
Too big and unwieldy - Insufficient manpower management on both sides
Too complex, bogged in process no partnership - 3000 page report concluded!

32. Poor outsourcing example – 3..cont
County Director of Finance Kevin Nacey concluded;
“The sheer size and complexity of this contract has
proven difficult to manage.” - few knew exactly
what they getting into or where it would lead.
The £600million contract was supposed to save the
county council £180million over its ten-year lifetime – it didn’t.

33. So what leads to success in Outsourcing –
What have we learnt?

34. So what leads to success in Outsourcing –
What are the ingredients?
Sound Service Delivery
Model

35. Sound Service Delivery
Model
Good working
relationship
So what leads to success in Outsourcing –
What are the ingredients?

36. Sound Service
Delivery Model
Good working
relationship
Incentivised
financial model
So what leads to success in Outsourcing –
What are the ingredients?

37. Sound Service
Delivery
Model
Good
Working
Relationship
Incentivised
Financial
Model
=
Successful
Operation
So what leads to success in Outsourcing –
What are the ingredients?

38. Solid Outsourcing Foundations
Clear & well lead Procurement Plan – Consultancy support?
Encourage the ‘right fit’ suppliers to apply and prequalify
Ensure that weighting & scoring is not too price driven
Challenge the short listed suppliers on their offer – is it deliverable?
Insert risk and reward matrices plus sensible KPI’s - Open book is best
Create a sensible workable partnership – no secrets!

39. Procurement and its Criticality
We are often reminded;
‘If your cant measure it you cant manage it’
Similarly
‘If you haven’t done don’t try to buy it’………

40. Matching Suppliers to Opportunities
‘Right Fit’ – what do I mean?
Scale, skill, experience, availability, desire
So who are they?

41. The high end players
- £ 150m - £2.2bn sales
- 1,600 – 62,000 staff
- More Muscle less
focus?
I-FM.Net top 50

42. I-FM.Net top 50
The Mid Tier Players
- £ 12m - £200m sales
- 360 – 6,700 staff
Less muscle more
focus?

43. 0
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3
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Category 1 Category 2 Category 3 Category 4
Series 1
Series 2
Series 3

44. To Outsource or not
to Outsource? –
that is the question
The Conclusions……..

45. Conclusions - Yes outsourcing is probably
the best solution – BUT, these are musts…………
1. Clear objectives careful planning - ‘on message’ Client/Consultant team
2. No negative or protective personal agendas
3. Careful selection/matching of potential suppliers to the opportunity
4. Sensible clear and thorough process – above board and open book
5. The finance and payment terms need to work for both parties
6. Risk & Reward by fair measurement of commercials and Performance
Easy as that…………………

46. To Outsource or not
to Outsource? –
that is the question
My conclusion is To Outsouce,
but do it sensibly……………

47. NHS Property Services
Our purpose

48. Who we are
 We manage one of UK’s largest
property portfolios, worth over
£3 billion
 We own 3,500 NHS properties
 10% of the total NHS estate
 Our focus is on driving
efficiencies
 Savings are reinvested for the
benefit of the NHS
 A Limited company, owned by
the Secretary of State for Health

49. What we do
 Deliver professional property
solutions and services to our
customers:
 Strategic advice on estate and
infrastructure
 Manage new developments,
refurbishments and improvements
 Run facilities management services
 Dispose of surplus properties
 Maximise use of space, and ensure
efficient and cost-effective use of the
portfolio

50. Our priorities for 2015/16
 Enhancing customer experience, forging better
relationships and working in partnership with the NHS
 Making decisions more quickly by changing internal
approval and procurement processes
 Improving our project management so that we better
deliver new capital projects
 Documenting occupations
 Continuing to drive down our property, facilities
management and people costs
 Continuing to make new investments in services,
equipment or facilities
 Working closely with NHS England to support delivery
of the NHS Five Year Forward View

51. Helping customers
Reduce facilities management costs
 Streamlining inherited contracts from
2,000 to 200 while improving services
 Bringing some services in-house,
procuring others
 Clarity of services: standardised
company-wide processes
 Standardised contracts: consistent
performance measures
 Savings passed back to tenants to
benefit patients and the taxpayer

52. Case Study 1: FM Provision Sandwell
 2014 - Services procured
via contractor outsourcing
 2014 - Services reviewed to
determine which items to
deliver internally
 2015 - Mobilisation and “Go
Live”
 Efficiencies realised

53. Case Study 2: In-house Security
Provision
 3 Contractors
 1 in-house team
 Review of current services
 Adjustment of historical
arrangements
 Key decisions to be made
 Efficiencies to be realised

54. 315
Determining an FM Delivery Model –
North Central Region
276
2014/15 FM Service Delivery Model
2015/16 FM Service Delivery Model
50
301
9
Insourced
Outsourced: Bundled
Outsourced: Single
Total FM Services
8
63
196
9
Insourced
Outsourced: Bundled
Outsourced: Single
Total FM Services

55. FM Delivery Model Factors Affecting the Choice of
Delivery Model
Outputs Benefits
Insourcing Regional Capabilities
Type of Service
Geographical Capabilities Internally
Resource – Systems
Resource - People
Geographical Capabilities Internally
Compliance Assurance and Risks
Strategic Intent
Cost Savings
Resource Utilisation Efficiencies
Documenting and Base lining Service Delivery
- Consistent performance Measures
- Clarity on Service Provision
Outsource: Bundled Geographical Capabilities Internally
System Alignment
Supplier Management: Geographical Capabilities
Internal Policies / Governance (SFI’s)
Cost?
Monopoly? – Service Delivery Risks
Customer Benefits
OJEC / OJEU
Economies of Scale – Cost Saving
Wide Scale Innovation [i.e. fem]
FM Delivery Model Streamlined – Better
Management Practices more Control
Outsourced : Single Provider Suitability and Accessibility
Geographical Location
Type of Service
Internal Policies / Governance
Business Continuity
Bespoke Service Delivery to Customer and
Building Needs
Total FM Internal Policies / Governance
OJEC / OJEU
Business Continuity

56. Questions?