Life after Carillion
FMJ and leading FM company Salisbury Group brought together a group of senior client-side FMs under Chatham House rules to discuss the sustainability of FM contracts and how to deliver mutually beneficial partnerships for clients, service providers and subcontractors
- Sara Bean (chair), Managing Editor, FMJ
- Nick Platt, Managing Director, Salisbury Group
- David Tarbuck, Head of Communications and Content, Salisbury Group
- Charlotte Bovill, Operations Director, Salisbury Group
- Stuart Bonner, Senior Director, Investigo
- Mark Lishman, Head of Facilities, Safestore
- Jon Ellis, Head of Property and Facilities, AA
- Vicky Thorp, Head of Facilities, CLS Holdings
- Lucy Hind, Facilities and Sustainability Director, Covance
- Simon Francis, Head of Estates, London South Bank University
- Glyn Jones, Head of Facilities, Stevens & Bolton LLP
- Ian Wright, Head of Soft Services, University College London
- Robert Crawford, Group Head of Facilities Management, Pattonair
- Paul Mullins, Head of Facilities, Travers Smith
- Andrew Alderson, Head of Property and Estates, Bluefin Insurance
- Joseph Delap, Head of Property and Facilities, Nuvia
- Adell Vass, Head of FM and Projects, Landmark
The reputation of outsourcing within the FM sector has taken something of a beating following the collapse of Carillion. The damning conclusion of an influential group of MPs was that “recklessness, hubris and greed” led to the construction and FM firm’s collapse. The ongoing enquiry by the Public Administration and Constitutional Affairs Committee has warned that a similar collapse could happen again unless lessons are learned about risk and contract management, and the strengths and weaknesses of the outsourcing sector.
Given this kind of negative publicity, we began our discussion with the question of what services suppliers can do to help win back confidence in the sector.
According to Nick Platt, Managing Director at Salisbury Group, one of the most important areas to address is that of transparency. “In the procurement process you might have hungry sales and procurement people who agree on the price but not the level of service. This is why due diligence must be done during the tender process. Suppliers want to win business but they need to see beyond that and sell the value-adding benefits to the business and not just the cost. This means some [contracts] might come in at a higher cost but work out much more positively. This is how you build a good trusting relationship.”
Participants agreed that you need to establish a partnership arrangement throughout the supply chain to avoid situations where procurement walk away after hitting their target, leaving FM to deal with the consequences. Said a senior client-side FM: “It goes back to the relationship thing again because we’ve got to trust our supply chain is delivering what we asked them to, and that will only come about if we’ve got a good contractual relationship.”
It was proposed that one of the biggest challenges revolves around how FM is perceived within the client organisation. The FM pointed out: “If we’re just here as a cost centre then it’s about draining everything down to the bottom line, when it should be about how we can add value to the business and support our core business to deliver its objective.”
It was established that yes, cost is important but it is only a small element. “It’s important to work closely with procurement to make sure the percentage of quality far outweighs the cost to achieve the most economically advantageous tender, rather than the one that is the cheapest.”
Q: How can FMs convince their client organisation that the costs are worth the investment?
Ideally FMs would put a business case in front of the board which clearly demonstrates that productivity will increase if the workplace environment is improved, but that’s difficult to prove. However, as a head of FM explains: “Read the corporate business plan and ask yourself what you can do as an FM to support year one, two or three and build your FM business plan around that. Look at the business as a whole, involve the practice groups and present the CEO with ideas on future developments; for example, space innovations to help the business work better by helping to create a more comfortable workplace for occupants to spend their day.”
Health and wellbeing is growing in importance within the sector and it’s an area where FM can have a real impact on productivity. An FM reported they were “working closely with HR on an analysis of the number of people off sick, why they’re off sick, the environment in which they’re working and ways of providing the right working environment that helps keep staff more healthy and motivated”. Accurate data is vital for this kind of process, which is when a close partnership with a supplier can help the facilities people monitor data to provide feedback to their organisation on everything from the room usage within the workplace to the quality of the ventilation.
The client FMs in the room agreed, however, when clients ask service providers to invest they’re also asking them to take the risk at the end of the three- or five-year contract. As one FM client described it: “I might have to say, ‘sorry, the money has been turned off.’ This means I’ve not been transparent or honest and therefore the market might take the view ‘this is a bit risky so I’ll price accordingly’. We have to have a partnership relationship and ring-fence the money, as shouldn’t client-side FMs also gain their service supplier’s trust?”
The discussion moved on to the importance of investing in a good software system which can help make assets last a lot longer. However, it was pointed out that it’s vital to ensure data is inputted correctly, which “requires as much investment in the time it takes as the cost”.
When it comes to ownership of data, it was suggested there has been a change in the marketplace whereby if the client is a large enough organisation they’ll buy in their own CAFM system. As one head of FM described it: “This is because when a large contractor provides their own CAFM platform, you leave them and they provide you with a load of unreadable data in HTML format from over the past five years. This is because many of the larger providers dress everything up within that system, meaning you simply can’t sieve through the data.”
Q: Carillion has been censured for displaying “utter contempt for its suppliers, many of them small businesses”, while it was also condemned for using its suppliers as “a line of credit to shore up its fragile balance sheet”. How can FM clients reduce risk to their organisation and supply chain when choosing a contractor?
Said Nick Platt: “We get frustrated because [during the tendering process] we’re often asked questions such as how many engineers do you have, how many cleaners? That’s great but ask us ‘how much debt do we have? What is our pension liability? What is our dividend policy?’ Some large companies chase a number and say to their current customers, ‘I’m going to take resourcing money from you to discount another customer’. That means they will do that in the future and the whole process becomes just chasing a number. We are doing things differently and we don’t pursue tenders where we feel the tender process doesn’t fit with our culture.
“There is some really good procurement in FM but unfortunately there are some really bad habits as well. Finding a way of achieving transparency requires determining what you want to achieve.” Delegates concurred that choosing the right supplier is often less about going for a big brand name than looking at the quality of the people who manage the account.
“We insist on the operational teams coming in to do the presentation, not just the sales people,” commented one head of FM, while another reported they “asked one supplier ‘who is your longest serving account director, why is that the case and can we have a chat with them?’ When you go to take on a service provider you want to ensure they’ve got people who are actually going to be there.”
Q: How can you ensure the people who are TUPE-ed over as a result of a change of service provider will be sufficiently competent and motivated?
Most participants agreed that whether staff are competent or not, clients will expect their new service provider to performance manage them.
Said Charlotte Bovill, Operations Director, Salisbury Group: “There is a misunderstanding with clients that on changing service provider the service will instantly improve. In reality, the existing employees TUPE transfer to the new provider. It is crucial for the new provider to ensure that employees are inducted in the correct way and made to feel motivated to the new ways of working and the new management as soon as possible. However, there has got to be an understanding by the client too that the new contract won’t be perfect from day one.”
Facilities is about people, agreed another contributor, “so if [the previous supplier] lost the contract due to poor performance it’s probably the people that have brought them down. On the good side you’ll keep the knowledge, but on the bad side you might still keep bad practices. That said, you might not inherit bad workers – just a bad contract.”
It was also suggested it would be better to aim for five- or seven-year contracts rather than three, where there is more opportunity to create partnerships. “Dealing with staff performance takes a lot of time, particularly within the public sector where it takes time to manage change – and with a longer contract you’ve got more time to establish a true partnership.”
Q: What can be done to support SMEs who deliver specialist services?
It was argued that following Carillion, we have to be careful we don’t take a knee-jerk approach to bringing specialist services back in house. However, clients need to pay closer attention to how the supply chain is treated and should insist on knowing what the payment terms are – and confirm that’s how their supplier operates.
Said an FM and property manager: “A few years ago, we’d have said, ‘it’s your responsibility’, but now we have an obligation to say to SMEs ‘we’ll watch your back now.’ The way we order our procurement is as much moral as cost-based. We have a three-stage audit, where the facility manager on site will instruct the contractor. They’ll then facilitate an internal audit, and then we go and do a head office tender. We will look at whether they have a modern slavery policy, health and safety policy, we check their systems and audit their sites. This is as much based on protecting our reputation because a negative impact on their business is one on ours.”
It's all about people
Stuart Bonner, Senior Director at recruitment research firm Investigo, commented on the next generation of facilities managers. “Today’s CFOs are not so much interested in a percentage reduction in the cost of FM but rather in moving from a building into a smaller space, and saving millions by introducing agile working. Are FMs networking with CFOs to check that they understand what your world is all about? To be a good FM you care about the people around you, but aren’t there different skill sets required within the C suite? And are the skills at the top different from what you need to get there?
“Yes, people often fall into FM and when they get to top they find it hard to influence. [The] only time FM gets discussed at the board is when it goes wrong; that’s why FM has to be good at PR and sell what it’s doing all the time.”
He also noted that if clients are doing more and more outsourcing they can’t bring in new people and train them up. This means career progression tends to come through the service provider and then move into client side. Yet how often will a CFO go out to market and take on people from the client side or from the service provider route for a role?
It was agreed that more cross-fertilisation is needed between client- and supplier-side FM, and the discussion concluded that fundamentally, in-house facilities managers and those from the service providers require very similar qualities in their people: to look holistically at an organisation and help create an environment that helps it achieve its aims.
Read full FMJ August issue here