Facilities Management (FM) continues to reel under pressure of lower margins. As a result of this downtrend, it is struggling hard to maintain a healthy bottom line as well as uphold quality standards.
Clients for various reasons remain determined to cut costs with consequence of its spiral impact on industry hardships. To further understand this trend and to analyze the context, it is important to understand the macro structure of the FM industry and how its large clientele that controls 2/3rd of organized FM, can play a role to address the issues.
Besides the organized FM, there are two other large business segments in FM: clients’ self-delivered service portfolio and the non-organized FM.
Though these represent a large footprint, they have their own complexities, especially in the organized FM, where a large portion of services are provided through the SME (small and medium sized enterprises) segment that is fragmented.
In context to the organized FM industry that truly represents the Integrated Facilities Management segment in the region, the lion’s share sits with governmental entities and developers.
My contention in this opinion piece is to discuss how these organizations with significant FM portfolios can play a constructive role in upending standards in FM and safeguarding desired FM goals. I do have my reservations about their current practices. Barring a handful of companies, few adhere to the desired merits in their sourcing decision-making.
The pricing factor is reigning supreme with utter disregard for fundamentals, that circumvents the FM goals. They need to relook at the robustness of their sourcing processes and its effectiveness whilst looking at price and governance.
They must not undermine the primary goals of Facilities Management from meeting end-user needs, safety and security and the longevity of assets, not leaving other value-added services. Their procurement departments must realize that they have a colossal responsibility to follow best practices and must not lower their bar on intrinsic cost merits that undermines the desired service levels.
They must not just follow the book on the basic procurement approaches but look at the desired quality in their process. I am not questioning their code of conduct, but I am certainly concerned about their lop-sided approaches to price bias.
I understand everyone is under pressure of lower budgets pushing costs down, but pricing is not the sole factor in selecting the merits of the bidder.
Clients’ supply chain teams are responsible for demonstrating in dealings with their supply chain partners that no substandard procurement practices are followed. They must demonstrate principles of high governance, transparency, and fairness.
I firmly believe clients with large portfolios, especially governmental entities, are entrusted with public trust, and to sustain this, they have the responsibility to safeguard FM standards.
They must ensure their engagements with service partners are based on merits, balancing both quality and price, taking extra measures to maintain fair practices and setting a high bar that the FM industry is looking for.
One of the most important steps is establishing clear procurement policies and procedures. These policies should be based on established principles of transparency, competition, efficiency, and fairness.
They should be designed to promote competition among bidders, facilitate equal access to opportunities, and ensure that the selection of suppliers is based on objective, measurable criteria.
My contention is that the requisite criteria that should be followed in any bidding engagement, in the current context is in absolute tatters. It seems like most tender processes are a smoke screen, an exercise apparently undertaken with commercial goals as the only consideration, setting aside all other merits.
Many of the clients have established evaluation criteria for preselecting suppliers based on RFI but this is seldom done with due merits. Even in the RFI stage, most lack objective and measurable factors, leaving room for complex bid outcomes.
Rarely have I seen the application of due merits in technical assessment. It is either entirely ignored or the selection criteria being used paves the way for targeted pricing, undermining the very fairness a bid needs.
Establishing clear evaluation criteria can ensure that the selection of suppliers is based on objective, quantifiable factors, which will help maintain fairness and transparency in the procurement process.
Companies must ensure comprehensive governance in the preparation of quality RFPs with the due provision of all accurate data and adherence to proper protocols in site surveys with exhaustive technical assessments. An essential do of this exercise should be the commercial segment.
Their commercial considerations must factor minimum cost elements from minimum wages to standard cost benefits in terms of human resources deployments and productivity dynamics.
Time and again, I have been advocating an intrinsic cost model where clients do a prior bid exercise to evaluate the pricing to arrive at a basic cost model factoring on all desired standards and these considerations must not be diluted due to budgetary limitations.
Often pricing limitations circumvent the needed FM standards. The clients’ supply chain must ensure that service providers pricing below the minimum cost standard will face disqualification. Certain indicators can be used to technically evaluate a bid, such as workforce schedules, OEM service schedules and submission of well-defined Standard Operating Procedures and Service Level Agreement matrix.
However, in reality, I see very scanty reviews by most clients, with the maximum weightage left to commercial recommendations. In most RFPs, we see these objectives laid out in multiple commercial schedules that tenderers must provide.
By establishing clear policies and procedures, clients with sizable portfolios can promote consistency and objectivity in their procurement decisions, which, in turn, will help maintain fair practices in bidding, and build a more sustainable building management and operating ecosystem.
Another step that large clients, especially governments, can take is to ensure that their procurement staff are well-trained and experienced.
This means giving them access to the latest procurement techniques and technology and providing them with ongoing learning opportunities. They must shirk arrogance and highhandedness of ‘take it or leave it’, and the teams must take ownership of their core responsibility and position with an eye on impact, not just cost savings.
With skilled and experienced staff, clients can ensure that their procurement processes are conducted in an efficient, effective, and transparent manner.
In addition, large clients should establish effective communication channels with bidders. This includes providing timely and accurate information about procurement opportunities, issuing clarifications and amendments to tender documents, and responding promptly to bidders’ inquiries.
By providing effective communication channels, the clients can promote transparency and ensure that bidders have equal access to information about procurement opportunities. We face this issue in many engagements where no proper time is given, or pre-bid data is provided.
Moreover, bid outcomes must be announced and formally communicated and unsuccessful bidders should be given the opportunity for debriefing.
Finally, large clients should regularly review their procurement policies and procedures to remain current and relevant. They should solicit feedback from bidders and other stakeholders and continuously use this information to enhance their procurement processes.
In conclusion, maintaining fair practices in bidding is essential for clients procuring services by establishing clear policies and procedures, with provision of relevant information in the bid documentation. It also includes effective communication channels with bidders, providing well-trained procurement staff, setting clear evaluation criteria, and conducting regular reviews.