This website uses cookies primarily for visitor analytics. Certain pages will ask you to fill in contact details to receive additional information. On these pages you have the option of having the site log your details for future visits. Indicating you want the site to remember your details will place a cookie on your device. To view our full cookie policy, please click here. You can also view it at any time by going to our Contact Us page.

Is IFM no longer good enough?

29 August 2012

Large outsourcing groups may be confident that the demand for integrated facilities management (IFM) will continue to grow as organisations battle to reduce core costs, but new research into the industry indicates that they are facing significant challenges, with a number of IFM arrangements cancelled and returned in-house, and the suitability of the model for roll-out across the public sector in question.

The analysis comes from Apex Insight in it’s “UK Integrated Facilities Management: Market Insight Report". It observes that the market for facilities management services has grown steadily in recent years, showing resilience during the economic downturn. Indeed, evidence suggests that industry margins have held up remarkably well, as clients have continued to accept inflationary price increases and pay freezes have kept costs in check.

The transition from single to multi-service and IFM arrangements has gathered pace with leading providers such as MITIE, Compass and Carillion making a series of acquisitions to broaden their capabilities, leading to a market which, it is currently estimated, is now valued in excess of £8bn.

The public sector has recently been seen by the industry as a key growth opportunity. Around 26% of council services are currently outsourced, a figure which is expected to rise to around 32% by 2014-2015, as local authorities aim to reduce costs to meet government requirements for spending cuts. Similar trends are anticipated in central government departments.

However, there are also some causes for concern. The UK market for facilities management services is relatively mature compared to the rest of Europe, with penetration having now reached high levels in the private sector. Furthermore, some of those private sector organisations which previously embraced IFM have not seen it deliver the value originally claimed, and are now reverting to single-service arrangements.

The increasing disillusionment around PFI, including widespread concern over the scale of repayments now required and doubts expressed in Parliament that it has provided envisaged value for money, has led to doubts that a further round of large public sector outsourcing contracts will meet value-for-money expectations. Earlier in the year, it was estimated that around 38% of public sector organisations had cancelled outsourced contracts and brought work back in-house as a result of financial or performance objectives not being met.

"Although the IFM industry faces some strategic questions, opportunities certainly remain", says Frank Proud, director of Apex Insight. "Our research shows that larger operators have responded to an increasingly challenging landscape through a combination of making strategic acquisitions to build their IFM capabilities and entering less-mature international markets.

Despite negative sentiment around PFI, there are causes for optimism regarding the public sector with positive demand fundamentals, such as the need for more schools places and hospital and care home beds, while many are convinced that government spending cut targets can only be achieved via bold outsourcing strategies. Regardless of some past failures, there is no doubt that these arrangements can succeed given clear performance targets and cost controls".

Contact Details and Archive...

Print this page | E-mail this page