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Friday, 3 April

COVID-19 – Casting A Spotlight On Facilities Management Outsourcing 

COVID-19 – Casting A Spotlight On Facilities Management Outsourcing 

Tim Wright, partner at international law firm Fladgate, shares his thoughts on the ongoing challenges around facilities management outsourcing amid the COVID-19 pandemic. During his career, Wright has worked extensively with his clients' global integrated facilities management outsourcing arrangement, including strategy, extensive negotiations, scope expansions, service level agreements, service changes and re-procurements. He is a member of the Law Society of England & Wales, the Law Society of Ireland, ITechLaw, the Global Sourcing Association, the International Bar Association and the Society for Computers & Law.

At the time of writing, the UK is officially moving to the “delay” phase, with government advising that anyone with a new, continuous cough or a high temperature self-isolates for at least 7 days.  

With the FM sector already facing some headwinds such as the fallout of Carillion and other high profile insolvencies, the prolonged uncertainty caused by Brexit, concerns that new immigration rules may lead to staff shortages, and the impact of IR35 on the contingent workforce, some of the main challenges and issues for the Facilities Management sector are summarised below:

 

1. Communications

 

FM providers will need to navigate how to communicate with a wide audience which could include customers, subcontractors, suppliers and other third parties, employees and contractors, analysts, regulators and markets. With many different staff operating from a wide range of locations, often out of customer facilities, and a wide range of working and shift patterns, quick and clear communication is essential. Software tools can be used to enable specific audiences to receive individualised messages. Websites, intranets and hotlines (some of which incorporate text-to-voice technology) can be used to counter any perceived information vacuum.  

 

2. Contingency planning

 

The UK government’s Coronavirus action plan, which was announced on 3 March 2020, reveals a range of potential outcomes, from low to a severe and prolonged pandemic, with businesses asked to exercise the same caution. Since then, stock markets have tanked, the WHO has declared a pandemic, Italy is in lock-down, Ireland has closed all schools and universities, and Trump has banned flights from continental Europe. FM providers should review and revise business contingency plans, and test alternative arrangements as appropriate to enable options such as slimmed-down office hubs and remote working with consequent impacts for network bandwidth, user licences etc.

 

3. Supply chain disruption

 

FM providers may experience difficulties in procuring materials and supplies. For example, many cities in China are under unprecedented lockdown with restrictions on the movement of labour, or compulsory quarantine periods. Closer to home, operational staff, the larger FM providers depend on a wide range of smaller, specialist providers, many of whom may find it harder to cope with staff shortages due to self-isolation or illness, or may experience cash flow problems if other customers are adversely affected. 

 

4. Staff wellbeing

 

Employers are legally obliged to provide a safe working environment (whether based in the office or at home or elsewhere). The current situation will force them to think much harder about how to ensure employee well-being, including what to do about staff shortages caused by self-isolation or illness, and strain on the critical response, IT and HR teams as well frontline staff such as cleaners, porters, security and catering staff.

Corporate policies may need to be flexed e.g. to support working-from-home, ensure best hygiene practices or restrict non-essential business travel, as well as to provide additional support for more vulnerable groups e.g. pregnant women or staff with underlying health issues.

 

5. Business development and networking

 

Informa Markets recently announced that it has postponed the excellent Facilities Show which will now take place at Excel London on 8 - 10 September 2020, followed the earlier decision by Reed MIDEM to reschedule MIPIM to June 2 - 5 after the French government imposed a temporary ban on large public gatherings. Businesses will miss out on the deals done and leads generated at these and other events and will need to figure out other ways of filling their pipelines. 

 

6. Cyber risk

 

Whilst larger companies may already have out in place policies and practices which support remote working, for others the threat of contagion will have forced adoption of a more “agile’ approach to working in a very short period. Increased remote working brings with it the potential for cyber attacks with common vulnerabilities such as public wifi and connected devices (IoT) on home networks. 

 

7. Understanding contractual issues

 

FM services and outsourcing contracts come in all shapes and sizes. Where the scope includes food and hospitality services it is quite common to find a very detailed set of prescriptive requirements which should be followed after then outbreak of contagious disease, in addition more mundane service requirements. Where cleaning is in-scope, the environment may again mean a set of heavy requirements e.g. food preparation areas, cleanrooms and laboratories, manufacturing plant, compared with other facilities such as offices, trading floors and data centres.

Understanding the nature of the contractual duties and obligations owed to the customer will be important to determine the FM provider’s basic day-to-day obligations at an operational level, as well as reporting and governance, and to ensure that additional customer requests e.g. deep cleansing or mothballing of space are properly managed under change control. Relief event clauses should also be reviewed in cases unforeseen events such as pandemic permit additional time for delivery or incremental cost recovery. 

 

8. Force majeure

 

Force majeure may prove to be relevant where a FM provider is unable to perform its contractual obligations for reasons related to the pandemic. Under English law (and other common law jurisdictions), force majeure is a contractual remedy hence whether or not a FM provider will get relief will depend on the wording of the clause itself.

For organisations with complex supply chains, needing to review hundreds or thousands of contracts, to determine the position under force majeure and related liability and indemnity risk, AI analytics tools can be used to extract and analyse relevant clauses in the first instance. Sometimes, a force majeure clause will include consequential rights and obligations, such as requirement to implement a business continuity plan to attempt to mitigate the unforeseen event or a right to terminate of the event is still continuing after a certain period.

 

9. Frustration

 

This is a common law doctrine which might prove to be of assistance but is only likely to be considered if the contract doesn’t contain a force majeure clause which these days is quite rare. Frustration was developed by the courts to deal with situations which change fundamentally after the contract was entered into, and the bar to establish frustration of the contract is accordingly very high - the courts will not be quick to overturn the bargain made between the parties to a contract, hence it is rarely available as a remedy.

 

10. Relationship management

 

Last but by no means least, at times like these, FM providers need to work closely with their customers. Agreement should be reached (and documented) before steps are taken to implement preventative measures which may affect a customer’s staff and visitors such as temperature checking and screening. And where customers are in the midst of a re-tender (RFP or similar) or renegotiation of outsourced FM services, the various parties may need to work together to consider and - where needed - extend contract terms as more time may be needed to bring matters to a close. 

The above is simply a snapshot of some of the main issues when considering the Covid-19 outbreak in the context of the facilities management sector. Other issues, such as the availability of insurance, and problems bringing in staff from overseas, will also be relevant. Wellbeing of cleaning staff undertaking deep cleansing operations and other operational staff needs to be carefully considered. One silver lining to this dark cloud could be that customers become more open minded when considering innovative solutions such as robot cleaners and smart floor coverings. 

Picture: Tim Wright, partner at international law firm Fladgate, shares his thoughts on the ongoing challenges around facilities management outsourcing amid the COVID-19 pandemic.

Article written by Tim Wright

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