Facilities Management Features
FMLink Outsourcing Survey
January 7, 2002There has been a definite trend toward more outsourcing in recent years. The facilities management functions being outsourced are not only increasing, but the survey shows that they vary from company to company, as do the reasons for outsourcing.
The survey uncovered that the amount of time spent to manage outsourced contracts was not insignificant, and that this time varied quite a bit depending on the function being outsourced. Realized cost savings also varied depending on the outsourced function.
The results presented below are based on a survey run in May and June of 2001 from the FMLink Web site. Two hundred two FMLink subscribers responded. The survey was mostly multiple choice; some questions asked for rank ordering, and others asked respondents to provide a numeric response. All respondents were able to add comments to the questions.
Summary of Findings
There is a trend not only toward a higher number of FMs outsourcing, but also the number of functions being outsourced. Eight different FM functions now are each being outsourced by at least 45% of the respondents, and some by as many as 72%; the leadersCustodial and Housekeeping, Design and Architecture, and Landscape Maintenance. Just over one third of the respondents said that within two years, they expect to be outsourcing even more, with the largest increase expected in the area of Preventive Maintenance.
Most respondents are outsourcing either for Cost Savings or because of the need of a special Skill, Service or Equipment that is not available in-house. The primary reason for not outsourcing was the existence of In-House Staff for that function. One quarter of the respondents have brought an outsourced function back in-house, usually either because of Cost or Service Quality.
A fair amount of time was required to manage the outsourced contracts (at least 13 hours per month for each function, and as many as 44 hours for some functions). Most time was required for Engineering, Preventive Maintenance, and Design and Architecture.
Cost savings were seen more for Custodial and Housekeeping than for other FM functions. A distant second was Landscape Maintenance.
By far, the most difficult aspect of outsourcing was Contractor Selection.
FMLink also surveyed respondents to see if there were major differences in the findings for those who managed mission critical facilities (facilities that must be fully operational at all times). Most functions were outsourced slightly less for mission critical facilities than for regular facilities; the relative order of the outsourced functions remained the same, with the exceptions of Security (more outsourcing for mission critical facilities) and Landscape Maintenance and Major Moves (both much less outsourcing).
Most respondents did not perceive any major differences between managing mission critical facilities and regular ones. The trend toward less outsourcing for mission critical facilities appears to relate to the two largest problems cited by respondents in outsourcing mission critical facilities: inadequate contractor response time and the difficulty in training contractors to get up to speed with the clients procedures.
Company industries. No one group dominated the respondents. The largest groups represented industrial/manufacturing (15%) and financial services (13%), followed by education (9%), government (7%) and medical (7%). An additional 45% came from office buildings whose companies represented a variety of industries not included above.
Square feet managed. Forty percent of the respondents managed between 100,000 and one million square feet; sixteen percent managed between one and four million square feet; and eight percent managed over four million square feet.
Operating budget. The total FM annual operating budget broke down as follows (all numbers in US dollars):
At the present time, the average percentage of the annual FM operating budget spent on outsourcing is 38%; two years ago, for the same respondents, it was 32%.
Types of facilities managed. Forty-two percent of the space managed was leased, with the rest owned. There were an average number of 41 facilities managed by each respondent. Slightly over half the respondents (56%) managed facilities in a single metropolitan area.
Countries. Seventy-five percent of the respondents were from the USA, ten percent from the UK, and six percent from Canada.
Functions Being Outsourced
There was very little difference between which functions were outsourced in owned versus leased facilities. The results are combined here (the numbers will add up to be greater than 100% since many companies outsource more than one function):
Expected changes to outsourced functions over next two years. Thirty-six (36%) percent of the respondents said that within two years, they likely would be outsourcing at least one additional function that they are not outsourcing at present. For this group, the most mentioned function was Preventive Maintenance (40%), followed by several between 25% - 30% each (Engineering, Design and Architecture, Utilities Maintenance, Landscape Maintenance, and Major Moves).
Outsourced functions least likely to be brought back in-house. The three least likely services to be brought back in-house are the same as the three most popular: Custodial and Housekeeping, Design and Architecture, and Landscape Maintenance.
Outsourced functions most likely to be brought back in-house. Only 24% of the respondents said they either have already brought back in-house a service that had been outsourced, or would be doing so. None of the services stood out as one that was most likely (none were greater than 7% of the total respondents). When asked why previously outsourced services were brought back in-house, the two largest reasons by far were Cost and Service Quality; other choices included Oversight and Control, Response Time, and Time Savings.
Reasons for Outsourcing
The two most important reasons stated for outsourcing were Cost Savings and the Need for Special Skills, Services or Tools/Equipment. Mentioned by significantly less respondents was In-House Staff Reduction. None of the other reasons listed registered a significant score: Customer Service, Legal Issues, Quality Improvement, Time Savings.
Contractor selection process. The most influential source for contractor selection was Competitive Procurement. This was followed by Prior Experience with the Contractor, and then Referrals. No other reasons were significant, including advertisements, trade show exhibits, consultants and associations.
Reasons for not outsourcing. The only reason listed by a significant number of respondents for not outsourcing a function was the presence of an in-house workforce. None of the other choices (including "Other") were listed by more than 5% of the respondents.
Once the Outsourced Contractor Is Onboard ...
Evaluating the contractors performance. The most important way to evaluate the contractors performance was through direct oversight by the in-house FM staff. Three other reasons were listed as secondary: regular meetings with the contractor, staff surveys and/or customer complaint files, and performance-based measures.
Time spent managing the contract. The time taken by in-house staff to manage outsourcing contracts is not insignificant, ranging from 13 to 44 hours per month, depending on the type of function being outsourced:
Cost savings from outsourcing. Most cost savings from outsourcing (when compared to using in-house staff) were in the areas of Custodial and Housekeeping (52% of the respondents) and Landscape Maintenance (34%).
Each respondent was asked to list up to three functions for most cost savings.
Most difficult aspect of outsourcing. Thirty-nine percent (39%) of the respondents said that the most difficult aspect of outsourcing was selecting the right contractor. This was followed by managing the contractor (17%) and writing the proposal to select the contractor (13%). All other aspects were less than 8% each.
Outsourcing Mission Critical Facilities
FMLink was interested in seeing what was unique about mission critical facilities, in terms of whether and how their FM functions are being outsourced. Several questions focused on these types of facilities. "Mission critical" was defined to the respondents as facilities that must be fully operational at all times.
Quantity of mission critical facilities. Respondents stated that 53% of their facilities of their facilities were considered mission critical.
Types of mission critical facilities. Sixty-six percent of the respondents have Communication Centers, followed by 62% with Data Centers. Next most prevalent were Operations Centers (40%) and Call Centers (33%). No other single type was mentioned by more than 8% of the respondents.
Types of mission critical facilities outsourced. Forty-eight percent of the respondents outsource at least one of their mission critical facilities. Forty-three percent of those with Call Centers outsourced at least one FM function; others were Data Centers (39%), Operations Centers (32%), and Communications Centers (27%).
Functions outsourced in mission critical facilities. When asked which functions are outsourced in mission critical facilities, respondents reported most frequently outsourcing Custodial and Housekeeping (64%).
Differences in outsourcing between mission critical and regular facilities. No single difference stood out between managing the two types of facilities (from an outsourcing perspective). Forty-one percent (41%) said that there were no differences at all. The remainder were fairly evenly split, citing differences in either: the types of functions outsourced; contractor selection criteria; and contract oversight. The two largest problems cited by respondents in outsourcing mission critical facilities were inadequate contractor response time and the difficulty in training contractors to get up to speed with the clients procedures.