The document provides an overview of effective procurement in facilities management. It discusses the importance of procurement to finance functions and outlines common misconceptions. It also discusses opportunities for immediate savings in key expense categories like facilities management, energy management, contract cleaning, photocopiers, office supplies, and insurance. The document concludes by highlighting how Expense Reduction Analysts can help clients through independent analysis, tendering, implementation support, and regular audits to achieve typical savings of 19.7% across expense categories.

1. Effective Procurement in
Facilities Management
Simon Dodson & Ian Morrison
Consultant Partners

2. Today‟s Agenda
• Changing Face of Procurement
• The Importance of Procurement to Finance
• Common perceptions and misconceptions
about procurement
• Creating a Cost Conscious Culture
• Opportunities and strategies for savings
• What to do next

3. Who are Expense Reduction Analysts?
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•
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The world‟s largest specialist cost reduction and
procurement consultancy
Offices in 40+ countries and expanding - established in UK
in 1992
150 + consultants in UK
Expertise in 125+ cost categories
1500+ UK clients – currently 7000+ projects in process
Currently managing in excess of £600m client spend,
delivering unrivalled market intelligence and buying
influence with suppliers
Achieve an average 19.7% saving across all expense
categories for any size/sector of client

4. The Changing Face of
Procurement

5. What is Value for Money?
Service
Quality
Value for Money
Delivery
Price

6. Getting Value for Money
effective
= procurement

7. The importance of
effective procurement on
everyday organisational
costs

8. If staff & direct costs remain the same a 10% reduction of
in-direct spend is equal to 40% increase in Profit!
100
Profit
Profit
Staff
Staff
Outgoings
Direct
costs
In-direct
5
45
Direct
Costs
30
In-Direct
Costs
20
100
7
+ 40%
45
30
18
Other improvements that would result in the same increase would be:
A reduction in Staff by 5%
A reduction in Direct costs by 7%
An increase in New Business
- 10%

9. The importance of
Effective Procurement
to Finance

10. CFO‟s Surveyed by CFO Magazine
said:

11. ERA research – conducted 2 surveys in 2013
• „The Psychology of Procurement‟ research uncovered
the following with Finance Directors/Board Level
Directors
– A lack of understanding at board-level of the strategic
value of procurement – in fact almost half discussed
procurement at board level only once a year or never
– A lack of internal procurement skills – untrained, ill
equipped staff to deal with an array of purchasing needs
– Resistance to internal procurement by internal
departments
– Inefficient and unmanaged supply chain partnerships

12. ERA research – conducted 2 surveys in 2013
•
The 2nd research piece focussed on „purchasers‟
and their attitudes towards procurement
– 4 out of 5 organisations didn‟t have a specialist
procurement team or individual
– Only 21% viewed their suppliers as partners
– Decisions are dictated around price and poor service,
59% would not review unless there is a problem
– Lack of companywide controls and formal training,
and value placed on the procurement function

13. What‟s your perspective on Effective
Procurement
• Are you getting value from your suppliers?
Where is the evidence?
• When did you last benchmark?
• When did you last review and test the market?
• Is cost management part of your financial
strategy?

14. Common
Misconceptions

15. Common Misconceptions
•
Pricing from suppliers is applied evenly to similar customers
•
Your expertise in procurement across one cost category will
produce similar results in another
•
National pricing agreements are always better than local or
regional agreements with the same company
•
Loyalty to a supplier automatically translates into best
pricing and service

16. Common Misconceptions
Buying consortia
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•
•
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Working in your interests or their own?
Their commission model changes incentives completely
Cosy relationship with certain suppliers - rarely research
the whole market
No troubleshooting, personal service, consultancy advice or
collaborative partnership
The preselected range of products/services do not fit every
user circumstance
Compliance is all but who is monitoring it?

17. Cost Management
Challenges

18. Cost Management Challenges
•
Multiple suppliers and order points
•
No internal benchmark data on purchases
•
Staff and management have limited time and resources to
address non-strategic costs and to monitor if savings are
being actually and consistently achieved
•
No real culture or importance attached to reducing costs
and improving value from suppliers
•
Employees with limited purchasing experience are making
buying decisions

19. Create a Cost Conscious Culture
•
Lead from the top
•
Publish success
•
Involve all the stakeholders
•
Provide training and support

20. More than just
Cost Management

21. • Understanding
needs
• Supplier selection
• Professional
tender
management
• Implement savings

22. • Making sure
people buy right
• From the right
suppliers (avoid
maverick spend)
• To the agreed
buying policy i.e.
Contract lists
• Provide knowledge
transfer to make
employees better
buyers

23. • Monitor supplier
performance ongoing
• Professional
supplier
relationship
management
• Challenge any
price or service
issues
• Manage risk ongoing

24. Setting your strategy
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Identify components of non-core operating expenses starting
with your General Ledger and a comprehensive supplier
analysis
Establish an overall strategy for cost reduction & agree goals
Develop a goal over a minimum threshold for each expense
category
Set a timeline for results
Establish expectations for each person who will participate in
the process, employees must have a true stake in the
performance of the company
Audit actual savings vs forecast on an ongoing basis

25. Make your account as attractive
as possible to the supplier
•
Provide as much information about your buying patterns &
usage as possible
•
Forecast future needs (growth if realistic)
•
Minimise the suppliers risk
•
Create a competitive environment

26. Don‟t just get the best deal,
maintain it
•
Set up reporting and management information
•
Review KPI‟s at a high level
•
Track supplier performance
•
•
Go back to market at least annually
•
Get hard evidence on any price change
Monitor internal buying habits

27. Coffee Break

28. Effective Procurement in
Facilities Management
Opportunities for
Immediate Savings

29. Questions you should
ask to find savings in six
common expense
categories…

30. Facilities Management
30

31. Facilities Management
Typical situation:
• A large number of fairly small services with differing
requirements and service levels
• Legal compliance is a great concern
• It‟s a significant cost
• Contractor in place for many years
• Client believes they are receiving good service/value
• No recent market test to validate this view
• Client fearful of introducing service risks

32. Facilities Management
Characterised by:
• Opaque and one sided contracts (if any at all)
• Lack of pricing transparency, KPIs and agreed
service levels
• Reactive works are difficult to quantify and
measure, with multi-layers of charges
• Contract creep occurs frequently
• Contract fatigue over time
• Client bears all of the risk!

33. Facilities Management
Huge opportunity to:
• Renegotiate contracts, even mid term
• Revise specification to ensure compliance where
required but not over do it (PAT now risk based)
• Ensure Planned Maintenance meets site requirements
• Bundle services together to drive efficiencies
• Significantly reduce costs
• Improve service levels by implementing SLA/KPI‟s
• Engage suppliers to proactively improve value

34. Energy Management
34

35. Energy – efficient procurement
Be pro-active
•
Due to the volatile nature of energy markets, there may be opportunities to
renew contracts well in advance of a current contract end date.
•
Adopting a pro-active approach helps avoid rushed decisions and potentially
punitive out of contract energy rates being charged from your incumbent
supplier.
•
Delaying tenders until the last minute increases the risk of punitive out of
contract rates being applied.
•
To gain maximum bulk purchase benefits all contract end dates per fuel
need to be aligned, meaning fewer tenders and enhanced ability to budget.
•
A single supplier per fuel will minimise invoice processing costs.
•
Appropriate contract term requires consideration of budgetary
requirements, actual tender results and market projections.

36. Energy – efficient procurement
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•
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Beware of T&Cs – take or pay contracts
Extra charges if you use more or less than you
contract
Do you have accurate consumption data?
Is it based on estimated or actual meter reads?
Consider renewables?
• Solar panels
• Better control and management of energy
• Evaluation of boiler efficiency?

37. Energy – efficient procurement
Reducing energy costs can only be achieved through
effective consumption management:
•
control what is used – turn lights off
•
make use of free energy (heat & light)
•
recycle water (rainwater harvesting)
•
use alternative fuels
Better control and management of energy through effective
measurement
Managing energy costs is complex, evaluating any energy
proposal is even more complex!

38. Contract Cleaning

39. Contract Cleaning
Characterised by:
•
Opaque and one sided contracts
•
Lack of pricing transparency, KPIs and agreed service levels
•
Contract fatigue over time
•
Supplier slow to update materials & equipment

40. Contract Cleaning
Typical situation:
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It‟s a significant cost
•
Contractor in place for several years
•
Client believes they are receiving good service/value
•
No recent market test to validate this view

41. Contract Cleaning
Huge opportunity to:
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Renegotiate and rebalance contracts, even mid term
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Significantly reduce costs
•
Improve service levels
•
But be aware of TUPE regulations

42. Photocopier
charges & costs

43. Photocopiers
Typical situation
• World-class opacity of contracts
• Increasing costs for declining machine reliability
• Beware of renewing contracts before expiry
• Different contract end dates. And do you know them?

44. Photocopiers
• Who tracks and reports on the reliability of machines
against service contracts?
• Do your team know which printer is best for which
jobs or are they printing by convenience (the nearest
device)?
• Who specifies what type of machine you need – you
or the supplier? Are they under or over specified?

45. Photocopiers
Opportunity to:
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Review/future proof fleet size and location
Monitor copy volumes to make informed decisions
before renewing
Reduce page costs by up to 70% networking machines
as printers
Remove some desktop printers with attendant toner
savings
Ensure colour machines are default set to mono – up to
90% page cost saving
Negotiate hard – it‟s a competitive market!

46. Office Supplies
46

47. Office Supplies
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Are you buying your office supplies (including ink/toner and
break-room supplies) from one supplier (who)?
•
Do you have purchasing policies for office supplies including
minimum order size, contract item list, who can order items
not on the contract list?
•
How do you control product price increases
•
How do you audit office supply transactions to ensure there
are no overcharges or substitutions without your approval?
•
Are you receiving incentives/rebates for electronic ordering,
average order size or your annual volume?

48. Insurance
& Risk
Management
48

49. Insurance & Risk Management
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Is your organisation maximising the return on its insurance
expenditures? Are you transferring risk appropriately?
•
Have you completed a risk assessment/gap analysis and
determined any gaps in coverage or overlapping/duplicative
coverage's?
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Is your broker or agent being compensated in a manner that puts
them on your side of the table?
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Has the incentive of higher commissions been neutralised?
•
Do you know the types of coverage similar companies are carrying
and the premiums they are paying?

50. Review of Points Covered
• Changing face of Procurement
• Importance of Procurement to Finance
• Common misconceptions and challenges in
procurement
• Importance of a cost conscious culture
• Cost, Purchase & Supplier Management
• Opportunities for immediate savings
20% cost reduction = 40% increase in Net Profit

51. How Expense
Reduction Analysts can
help YOUR Company…

52. Expense Reduction Analysts Service
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Independent and forensic analysis of category expenses, service
levels, product quality and contract detail
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Additional supplier selection
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Full tender and analysis process
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Submission of options to client
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Administration of implementation of chosen option
•
Regular audits, supplier monitoring and management information

53. and over 1,500 others

54. Over 150 full time specialist procurement advisors in UK
Over 1,000 years combined procurement experience
Specialists in
 Print
 Communications
 Stationery
 Business Rates
 Travel
 Chemicals
 Catering
 Workwear
 Freight
 Vehicle fleets
 IT
 Labour hire
 Waste
 Banking fees
 Fuel
 Managed Services
 Packaging
 Utilities
 Cleaning
 Procurement processes
plus 100+ other areas

55. With Typical Savings of …
Printing
25%
Telecoms
30%
Insurance
18%
Freight
15%
Waste
22%
Food
10%
Workwear
15%
Maintenance
16%
Consumables 15%
Stationery
28%
Banking fees
22%
Rates
14%
Cleaning
20%
Security
16%
Travel
10%
Current Average Saving = 19.7%

56. Client Experience
Profile
£10m+ t/o and £15k+ spend per category review
Savings
ERA find savings in 92%+ of engagements
Average saving is 19.7%, often 30%+, highest 150%
Timescale
Projects take 8 - 10 weeks from agreement to implementation
Structure
Client confidentiality safeguarded
Incumbent supplier retained in over 60% of projects
Quality of product/service not compromised

57. Real Examples From Clients‟
Perspective

58. Client Success
“Expense Reduction Analysts have been very impressive. Not
only have they saved us a significant amount of money, but they
have also ensured that other vital factors – such as standards of
service and our Corporate Social Responsibility – were kept
Over £200,000
savings pa
clearly in mind when recommending changes”
“Expense Reduction Analysts has helped to save the
company hundreds of thousands of pounds, and
they‟ve also become a trusted partner, providing
advice on a range of process, compliance and general
Over £250,000
savings pa
business issues”
“Altering contracts to ensure they were fit for purpose in this
way has realised immediate and significant savings for the
company, however, there were complex negotiations involved,
requiring a degree of market knowledge that was not available
within the business.”
Over £50,000
savings pa

59. Client Outline
• The client is in the Health Care sector, total spend £5m across 322 homes
focused on Senior Care and Mental Health
• Property Maintenance consists of Property Services Manager, Helpdesk (3.5
FTE), Maintenance Officers (30), supported by 37 Sub-Contractors (spend
£3.5m)
Project Process
• Project objective defined by client; “Can you sort this mess out for me?”
• The project is broken down into Restructure Maintenance programme,
contract review, maintenance specification, help desk & maintenance
officers review, tender all maintenance contracts both in „as is‟ and as per
new structure.
• Benchmark “Best in Class” contracts, survey equipment and services to
create Maintenance Specification & Asset register, audit current Helpdesk
structure & processes (4 days on site), audit Maintenance Officers role.
• Fully understanding client‟s “Well Formed Outcome” & Benchmark current
costs, service levels, PPM, Reactive Maintenance and any hidden items.
• Issue tenders both for consolidated and separate services.

60. Project Outcome - Recommendation report produced including
• New specification that meets client‟s requirements & tender format that preserves the
specification & contract.
• Clear direction for Help Desk & processes with integration into suppliers and their
finance function
• Recommendations for Maintenance Officers
Savings
• Planned Preventative Maintenance
21.5% saving £400k Spend
• Reactive Maintenance
13% saving £1.2m Spend
• Minor Project
13% savings £1.9m Spend
Phase 2 (Consultancy)
• Help Desk function
30% to 60% saving
• Integration of MO‟s into contractors
Approx. £0.5m savings
Challenges
• Winning the confidence of the senior management team & finding „hidden
stakeholders‟. Internal politics & change management
• Analysing the mass of data and current contracts (1600)

61. What
next?

62. Thank you
Any Questions?
s.dodson@erauk.net
i.morrison@erauk.net
www.expense-reduction.co.uk