A realistic assessment of costs never seems to enter FM contract negotiations. Image Credit: Shutterstock

In the past decade, I have seen a steep reduction in FM (facilities management) project costs by most clients. Maybe this is market-driven, but, unfortunately, these did not factor in the intrinsic cost of providing FM.

What is interesting is that most of these were dominated by aggressive postures by the supply chain, with pricing as the only criteria. In two-thirds of these cases, including some global corporations, the role of the operations team was conspicuous. They were muted in the bidding process and overwhelmed by the supply chain where only price mattered. In fact, in some instances, contravening the governance process itself.

I see long-term consequences of this trend that is bound to dent the impact of FM. Organizations make colossal mistakes by not including all stakeholders and leaving supply chains to prevail upon FM merits. The price is the single point of contention no matter what the RFP (request for proposal) entails.

I understand the objective of the supply chain is to seek efficiencies, cost savings, and lean strategies in the operating structure through competitive quotes. But do not to overlook the intrinsic cost factor when looking for service provisions with specific requirements. Comparing it to past baseline is also not the proper criteria unless historical spending is verified.

A spending reality check

Unfortunately, historical FM data is often not comprehensive, or the past maintenance spending is based on operations and maintenance modes that do not confer with the core FM specs. What is wrong in this process? First, RFPs are not appropriately mapped with services and specific SLAs (service-level agreements) needed as per the asset list, state of facilities and budget spend. Moreover, the bid evaluation often lacks comprehensive scrutiny where these fail to ensure that submitted bids comply with operational needs and related cost provisions.

Even the time needed for service providers to do due diligence is never adequate. Most site visits are rushed with not enough time given. In most cases, it is more of a formality conducted as a compliance checklist than its primary purpose.

In some cases, we noted that asset lists are never provided, and responses to clarifications are not comprehensive. The draft contract copy provided with RFP is usually a one-way document. You have to accept all RFP conditions with its submissions or face disqualification should you choose to provide a disclaimer.

Especially in services tenders, there are vague references to threshold limits with no clear co-relation to asset category and conditions. For instance, over 20-old structures pushed by the supply chain to have threshold limits of $10,000 on a comprehensive basis for spare parts is just not understandable.

Vague feedback to RFPs

It is the same with most cases - RFPs do not make clear demarcations between spare parts and consumables, leaving room for future disputes. Most RFPs don’t clearly define technical and commercials’ bid assessment and weightage criteria. Also, some derail their RFP decisions, prolonging the bid process and undermining the validity of various undertakings provided in the tender documents. Most of the feedback on the bid outcomes remains a formality.

Also, there are vague pre- and post-qualification assessment definitions in the issue of the tender documents with sourcing organizations. This leaves room for unethical competition undermining companies that are upholding their standards. Ideally, the RFP process should factor in the minimum threshold for service quality and infrastructure to eliminate these glaring gaps.

Why this apathy and why must it worry property owners or managers? A non-comprehensive supply chain exercise will undoubtedly impact long-term costs with likely cost inflations, extra energy costs, and on labour.

Cutting costs beyond the minimum threshold is counterproductive from all stakeholders’ perspectives. Any short-term cost cuts in FM or savings through supply chain negotiations will eventually eclipse huge mid- and long-term liabilities.

Moreover, it is more to deal with the building safety itself as asset breakdowns can be fatal with disastrous consequences. The history of building accidents foretells its repercussions - so supply chains need to take cognizance of the merits of my concerns.

It is time for stakeholders, developers, landlords, regulators, or strata companies to align themselves with FM best practices and realize the impact of these assumed savings. Under-spending on FM will lead to poor maintenance regimes leaving dilapidated structures that in no time will bleed them for much more than what they think was saved.