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Balancing the needs of FM clients and service providers

19 November 2020

Philip Ratcliffe says that providing a fair service to both sides involved in the tendering process is a finely balanced art.

Procurement within the FM sector is a topic that has attracted a significant level of attention in recent years, particularly following the failure of Carillion and the difficulties experienced by a number of other large service providers.

Much has been said and written about the practice of awarding contracts to those submitting the cheapest bids, leading to labels including ‘the race to the bottom’ and ‘short-term thinking’ to be applied to this practice.

There have been more positive developments in a number of areas more recently, including public sector contracts now including clauses focusing on the delivery of value.

Assisting clients to purchase FM services is one of the many areas of activity included in the Drees & Sommer consultancy.

Philip Ratcliffe is the group’s UK managing director and recently spoke exclusively to PFM magazine, sharing his views on the FM procurement process and wider industry issues. “I’ve seen FM evolve as a process since the early 90s and that’s coincided with watching the development of some of the industry’s biggest companies,” he says.

“It’s sadly become subject to commoditisation and very price-driven in many cases, which leads you to wonder just how sustainable some of the contracts have been.”

The reasons for the commoditisation of FM service provision are numerous and, although seen in other areas, seems to be particularly prevalent in many areas of the FM industry.

“I struggle to think of another sector that is so open, where everyone knows how much every operation costs.

"Other industries are much more accepting of an overall price and more appreciative that this will help their supply chain remain profitable and continue to operate as healthy businesses,” Mr Ratcliffe continues.

He believes the reasons for short-term procurement practices and focus on the lowest price are due to faults on all sides of the FM industry.

In an effort to improve the tendering process, his company makes considerable efforts to assist clients to reach conclusions that are more sustainable for them and their supply chain.

“We always make a lot of effort to explain the benefits of establishing relationships and many clients have taken this onboard and enjoyed much more productive, collaborative partnerships as a result,” he says.

“You have to match the strategy with how the end result is achieved, finding the service provider that is best suited to meeting the needs of the client.”

This requires his company to play a supportive role that includes liaison with all those involved in the tendering process:

“We aim to make it as open and transparent as possible to be fair and give everyone the same chance of winning the business.

“We don’t want to dominate the conversation, we’re there to encourage everyone to build meaningful relationships and hope that at the end of the process, everyone feels they’ve had a fair crack of the whip. This is a much more positive approach and gives everyone the same chance to put their case forward,” he says.

“I see our role as helping clients find the best way to achieve their goals and we’ve known some of our customers for many years.

"It’s hopefully a good sign that they keep coming back to us,” says Mr Ratcliffe.

He states that the FM sector frequently struggles to explain the value of the service it provides, leading it to be regarded as a cost rather than an essential part of the business operation.

“There’s only so much that you can wring out of the flannel of cost and you’re then left with the question of how does it manage to survive,” he says.

“This has led to overselling combined with underperforming in many cases that then adds further to any negative impressions. We sometimes advise companies not to focus on embedding the delivery model and, when engaging with new contracts.

“Then, when it’s shown to be working in a sustainable and repeatable way, to look at introducing innovations.

"This avoids providers being expected to mobilise and transform service delivery, without getting first to a steady state.”

Mr Ratcliffe does not sound in the least surprised by the many successes delivered by FMs and their service providers this year in dealing with the impact of the Covid-19 virus.

“All FMs are extremely practical and many have shown an ability to quickly visualise how to transform their workplace, while sourcing lots of new equipment such as PPE, etc.

"We’ve seen a few clients appreciate the attention to detail that’s been included in supporting members of staff and the overall process and we’ve seen the strength of the industry in getting things done, such as the NHS Nightingale projects and others.”

There have, of course, been issues within the industry but Mr Ratcliffe says that on the whole everyone has stepped up to meet the recent challenge.

Like many within the FM sector, he is continuing to watch how things develop over the next few months to gauge how things change in the future.

“We’re likely to see a much more transient workforce with increasingly diverse requirements and the question will be how FM needs to adapt to support the changes, such as more people working from home and spending less time in the office.

"They will need to be working as safely as possible and also operate in the right way, while remaining as productive as possible,” he says.

One of the issues to address will be how to stretch the supply chain to meet the changing demand that has emerged over recent months, that continues to see companies required to react in short periods of time.

“It’s been a difficult time for many but some companies are OK and are still able to work effectively and make money, but how the real estate market developments over the next few years is the big question.

"We’ve said for many years that FM was under-represented in the boardroom but it now has the opportunity to gain the attention of real estate directors’ C-suite.

“The last few months have provided a lot of attention for the skills and expertise in FM and how they can benefit businesses and we’re here to help our customers to create the processes and forge the relationships that will help them continue to improve,” says Mr Ratcliffe.

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