FM Costs Decided Before Supplier Prices Contract

Most FM Costs Are Decided Before A Supplier Prices The Contract

29 October 2026 | Updated 28 October 2026

Derrick Tate, Founder of Altrion Advisory, said that for CFOs, COOs, Heads of Real Estate or Heads of FM, one sign that trust has gone is when costs keep rising and you no longer believe you’re getting a fair deal. Before you reach that conclusion, it’s worth knowing what is really driving the numbers.

The number you see on the invoice is the output of five sets of decisions. Only some of them belong to the supplier.

1. Structural.
The portfolio mix, building age and condition, backlog maintenance, asset type, geography and distribution. A 1980s regional estate and a modern city centre estate will never cost the same, even when the sq ft and the specifications are identical.

2. Demand.
Occupancy patterns, opening hours, customer footfall, a growing or shrinking estate. Opening buildings 24/7 can significantly change the cost base.

3. Scope.
What is actually in the specifications versus what is assumed. What will be self-delivered or subcontracted. Integrated, bundled or single service. How tightly the specification is written, and which SLAs and KPIs are measured and how.

4. Operating.
Statutory compliance, systems and, above all, labour. The National Living Wage rose to £12.71 in April, on top of higher employer NI and pension costs. Staff already paid above it get pulled up too, to keep differentials.

5. Commercial.
The contract model, risk allocation, term, volume and indexation. Fixed price, cost plus, GMP and Vested don’t just price differently. They allocate risk differently, and that is usually the bigger decision.

Now look at who owns each one. Structure, demand and scope sit with you. Operating costs are largely set by the market and regulation. Commercial is shared.

The supplier controls a narrower slice: how efficiently they deliver, how well they manage and their margin and overheads.

That’s why a new supplier on the same estate, the same scope and the same contract model so often lands back at a similar number.

Rising cost isn’t always a sign of an unfair deal. Sometimes it’s the estate, the scope or the contract you chose.

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Article written by Derrick Tate | Published 29 October 2026