by Tariq Chauhan, Group CEO of EFS Facilities Services Group
In the past decade, as a part of our business development with bidding for over USD150 billion worth of projects in FM across the region, I have seen a steep reduction in FM project costs by most clients. Maybe all of this is market-driven, but unfortunately, most of these did not factor in the intrinsic cost of FM.
What is an interesting thing here to note is that most of these were dominated by aggressive postures of the Supply chain, with pricing as the only criteria.
In two-thirds of these cases, including some global corporations with their Corporate Real Estate Teams at the helm, the role of the operations team was conspicuous. They were muted in the bidding process, overwhelmed by the supply chain where only price mattered, which is not the best practice.
In fact, in some instances, contravening the governance process itself. I do see long-term consequences of this trend that is bound to dent the impact of FM.
Organizations make colossal mistakes by not including all stakeholders and leaving supply chains to prevail upon FM merits. The price is the single point of contention no matter what the RFP entails.
I understand the objective of the supply chain is to seek efficiencies, cost savings, and lean strategies in the operating structure through competitive quotes but not to overlook the intrinsic cost factor when looking for service provisions with specific service level requirements.
Comparing it to past baseline is also not the proper criteria unless historical spending is verified.
Unfortunately, historical FM data is often not comprehensive and precise, or the past maintenance spending is based on operations & maintenance modes that do not confer with the core FM specs.
What is going wrong in this process? First, RFPs are not appropriately mapped with services and specific SLAs needed as per the asset list, state of facilities and required budget spent. Moreover, the bid evaluation often lacks comprehensive scrutiny where these fail to ensure that submitted bids comply with operational needs and related cost provisions.
Even the time needed for service providers to do due diligence is never adequate. Most site visits are rushed with not enough time given. In most cases, it is more of a formality conducted as a compliance checklist than its primary purpose.
In some cases, we also noted that asset data or list is never provided, and neither response to clarifications is comprehensive. Also, the draft contract copy provided with RFP is usually a one-way document. This is considered a sacred document by clients with a clear message, take it or leave it.
You have to accept all RFP conditions with its submissions or face disqualification should you choose to provide a disclaimer.
Especially in hard services tenders, there are vague references to threshold limits with no clear co-relation to asset category and conditions.
For instance, over twenty-year-old structures pushed by the supply chain to have threshold limits of USD ten thousand on a comprehensive basis for spare parts is just not understandable.
The same is with most cases; RFPs do not make clear demarcations between spare parts and consumables, leaving room for future disputes.
Most RFPs don’t clearly define technical and commercial bid assessment and weightage criteria. Also, some derail in their RFP decisions, prolonging the bid process to many months undermining the validity of various undertakings provided in the tender documents.
Most of the feedback on the bid outcomes remains a succulent formality with no or a routine regret letter with no reason. Also, there are very vague pre- and post-qualification assessment definitions in the issue of the tender documents with sourcing organizations.
This leaves room for unethical competition undermining companies that are upholding the standards. These get exposed to deal with a dime a dozen cowboys, preparing to lower the cost with no reference to what capability these hold.
Ideally, the RFP process should factor in the minimum threshold for services quality and infrastructure to eliminate these glaring gaps.
Why this apathy and why it must worry property owners or managers? A non-comprehensive supply chain exercise will undoubtedly impact the long-term costs with likely cost inflations in breakdowns, extra energy costs, and labour, especially in the context of FM, where there are stipulated standards to maintain asset protection and longevity.
I will conclude that cutting costs beyond the minimum threshold is counterproductive from all stakeholder’s perspectives.
Any short-term cost cuts in FM or savings through supply chain negotiations will eventually eclipse huge mid and long-term liabilities.
Moreover, it is more to deal with the building safety itself as asset breakdowns can be fatal with disastrous consequences. The history of building accidents foretells its repercussions, so supply chains need to take cognizance of the merits of my concerns.
It is not in the best interests of any stakeholders to cut requisite FM spent just for a reduced-price tag.
It is time for stakeholders, developers, landlords, regulators, or strata companies to align themselves with FM best practices and realize the impact assessment of these assumed savings.
I would say these must admit to their complicity in the process as FM underspent that will lead to poor maintenance regimes leaving dilapidated structures that in no time will bleed them for much more monies than what these think have saved.
Source: Work Life Mantras