6 steps for an effective FM procurement process

By JTC

As facilities management (FM) contracts continue to evolve in terms of complexity and scale, weak procurement controls may result in project cost overruns and poor service delivery.

With multiple public projects under its belt, JTC constantly needs to exercise financial prudence and mitigate risks while ensuring smooth project delivery. In their experience, a robust and transparent FM procurement process can achieve up to 10% operating cost savings and manpower productivity gains.

According to JTC, there are six key success factors behind selecting the right partners, crafting effective contracts and managing the entire project process well.

Download the image [PDF, 110.57 KB] ↗ (opens in new tab)

1.Identify key objectives and tailor the procurement strategy accordingly

Before starting the procurement process, understand and identify the key business outcomes you hope to achieve.  By pinpointing the objectives beforehand, you are in a better position to shortlist the proposal that offers the best solutions.

Once your objectives are clear, align them with the procurement process. For instance, if cost sustainability is the desired outcome, then a “target cost” approach would might a better fit.

2.Get requirements rights

A lack of clarity in requirements and specifications could lead to an increase number of tender bid price. For example, if penalties or service levels within the contracts are ambiguous, it would force tenderers to include risk premium of tender and therefore, increasing the contract cost artificially.

Similarly, if the maintenance frequency and standards are overly stringent without reflecting actual operating needs, it could lead to inflated bids.  To mitigate this, procurers must have a good understanding of the cost implications of their requirements and make informed trade-offs between the two.

3.Promote competition from the right mix of suppliers

Being fair, open and competitive are pre-requisites for any tender of FM services. However, this is often not sufficient to ensure that the best service partner will be selected.  It is important that the tender evaluation matrix can separate the best from the average.  For example, instead of evaluating based on the number of relevant projects the tenderers have, a good evaluation model should be assessing these projects’ performance.

In addition, tenderers often have to second guess the true intention of public agencies because the tender period tends to be too short for any meaningful gap analysis.  To improve this process, procurers should provide clear answers to tenderers’ queries during the tender to ensure that the submissions are fit for purpose.

4.Create shared-outcome environment by aligning objectives with incentive

Even with good and progressive vendors, a misaligned incentive structure and sub-par performance management can still have a negative impact on the asset. Alignment of the objectives with incentives (and sometimes disincentives) would ensure that all parties and stakeholders have the same targets.  That will allow all parties to work in tandem and develop effective operational tactics to strive towards a common success.

5.Ensure transparency of information and use it well

Another key element of a successful partnership is to ensure transparency around data and information.  For example, without historical spending details, the vendor would not be able to identify areas for greater optimisation.  Without sufficient information, it can also be difficult to detect discrepancies or under-optimised resources.

While this does not mean that vendors should have unlimited access to procurer data or vice versa, it does mean that the procurer and its service providers should share relevant data. This collaborative approach would ensure that both parties function more effectively and quickly to resolve challenges and achieve key targets.

6.Retain in-house capabilities to manage performance

GPEs should also equip their staff with the right skills and, more importantly, mind-set to administer the contract.  For example, an outcome-based contract would not fulfil its true potential if the officer continues to administer the contract “prescriptively”.  A sound change-management plan may be required to ensure contracts are monitored appropriately but also accorded flexibility.

It is important for building owners to train its officers with relevant skills to do the following:

• Understand the intent: Monitor performance based on the contract and enforce outcomes stipulated in the Service Level Agreements.

• Dare to experiment: Collaborate with vendors to develop solutions vis-à-vis  changing operational needs.

• Be adaptive and resilient:  Adjust project management approach and nimbly adapt to situation changes especially in the context of a long contract duration. It is important that the officer is able to design and refine processes to adapt to the evolving FM landscape.