External fm presentation april 2014 fmp event v1
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Transcript of External fm presentation april 2014 fmp event v1
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
Content
• Weighing options
• Future drivers
• Risk of change
• Market perception
• Contract types and incentives
• Transition
• Contracting success factors
• Relationship success factors
2
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
Future Drivers
Cost control/cost reduction
New service lines
New geographies
Scalability
Flexibility
Asset class expansion
Analytics/modelling
Other
4
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
Click to edit Master title style
Analyse Current State
6
Commercial Structure
Relationship
Performance
Investment/ innovation
Vendor market position
Futu
re Im
po
rtan
ce
Market Competitive
High
HighLow
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
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
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
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
Click to edit Master title style
Contracting Success Factors
11
Clear Sourcing StrategyAvoid piecemeal process, inconsistency and lack of transparency
Defined Service RequirementsClarity on type and level of services
Address HR Issues UpfrontMake provision for legal and communication activities
Effective Change ManagementEffective processes and controls in contract
Baseline DataDetailed budget, staff models and improvement tracking
Preserved LeverageNon-exclusivity, termination/renewal rights. Effective governance process
Understanding Pricing StructuresOpen book, risk/reward, fixed fee, gain-share etc.
FlexibilityStructure contract to accommodate growth/contraction
Effective Risk TransferAppropriate KPIs, avoiding margin stacking
Understanding Contractual ContentParticularly risk allocations, insurances, indemnities etc.
Successful Sourcing
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Relationship Success Factors
12
Clear UnderstandingAlign at start:Client needs and expectationsVendor capabilities and responsibilities
AlignmentObjectives and financial goals are aligned so that both parties naturally act in an aligned way. Prevents dysfunctional behaviour from self preservation
Positive EngagementAn assumption of trust and belief that the other party is trying to do the right thingCemented on doing what is expected
MotivationCustomer team contribute to contract successVendor and staff compensation based on customer satisfaction
CapabilityVendor must be fully capable of delivering what is promised at a cost both parties expect
Data QualityCustomer and Vendor use accurate, complete, readily available (and the same) information to make decisions
CommunicationCustomer and Vendor communication is effective at all levels for timely decisions
Stakeholder EngagementCustomer has gained full cooperation of all stakeholders who can undermine the success of the relationship
Successful Relationship
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
Questions
14