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Read Full ArticleScott Fortune explores the facilities management outsourcing model and the potential hidden costs.
Scott Fortune is an Interim Facilities Director and Transformation Leader with over twenty years of experience across B2B, B2C, FM, banking, transport, public, consulting, SME and corporate sectors.
Outsourcing facilities management (FM) can appear to be a cost-effective solution for many organisations. However, several factors can lead to higher expenses. Below are reasons why outsourcing FM might cost more, along with examples to illustrate these points.
Outsourcing facilities management often involves hiring third-party providers who need to cover their own operational costs and profit margins. This can lead to higher service rates compared to in-house management.
Example: If a company pays £50 per hour for an in-house technician, outsourcing that work to a third-party contractor might cost £70 to £100 per hour. The contractor includes their overhead costs, insurance, and profit margin in their pricing.
Outsourcing contracts can include various terms and conditions that lead to unexpected costs. Hidden fees for services, penalties for contract adjustments, and costs for extra services that may not be immediately apparent can accumulate.
Example: A company might sign a contract stipulating a fixed monthly cleaning fee. However, if they require additional services like deep cleaning or window washing, these may incur extra costs that were not clearly outlined, leading to a budget overrun.
Outsourcing can sometimes lead to slower response times and less flexibility. If a facility management provider manages multiple contracts, its resources may be stretched thin, leading to delays in addressing urgent issues.
Example: An office building may experience a plumbing issue that requires immediate attention. An in-house team can respond quickly, while an outsourced provider might take longer to dispatch a technician due to scheduling constraints or other commitments. This delay could result in damage that incurs additional repair costs.
When outsourcing FM, companies may lose control over their facilities and service quality. This can lead to inconsistencies in service delivery and the potential need for more frequent oversight.
Example: A company that outsources its janitorial services may find that the quality of cleaning varies from one visit to another, requiring more frequent inspections or additional training for the service provider’s staff. The extra time spent managing the contractor can lead to increased administrative costs.
While outsourcing can reduce the burden of managing facilities, it can also introduce additional administrative tasks related to vendor management, contract negotiations, and performance monitoring.
Example: A facilities manager may spend significant time coordinating with various outsourced service providers, managing contracts, and addressing performance issues rather than focusing on strategic improvements. This shift in focus can increase operational costs due to lost productivity.
Transitioning to an outsourced model often involves initial costs that can offset any expected savings. This may include fees for training, integration of new systems, and the potential for service disruptions during the transition period.
Example: A company that decides to outsource its FM services may need to invest in new software to manage the relationship with the provider and train staff on how to use it. Additionally, during the transition phase, a temporary dip in service quality may require additional oversight.
While outsourcing facilities management can offer benefits, such as access to specialised skills and technology, it can also lead to increased costs due to service provider markups, hidden fees, reduced flexibility, loss of control, administrative burdens, and transition costs. Organisations considering outsourcing should carefully evaluate these potential additional expenses and weigh them against the benefits to determine the best approach for their facilities management needs.
Understanding these factors can help organisations decide whether to outsource FM or keep it in-house, ultimately aligning their strategy with their operational goals and budgetary constraints.
Picture: a graphic showing colourful counters in the shape of a question mark on a yellow background. Image Credit: Pexels
Article written by Scott Fortune | Published 19 November 2024
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